U.S. 3rd Quarter GDP Best Since 2003

I am happy that the economy is picking up and I notice my liberal friends are escatic. They feel vindicted, even if it took four years longer than it should have. But I noticed an interesting couple of headlines, to wit - U.S. 3rd Quarter GDP Best Since 2003. It has been more than ten years since the economy was so good, but I don’t recall the same euphoria among lefties in 2003.

I have confidence in America. Americans figure things out. But the real stimulus in this economy is the American energy boom. It kept us from falling down even further and is now going to push us forward. Frackers should be the "persons of the year."

Posted by Christine & John at December 26, 2014 6:40 PM
Comments
Comment #386938

C/J, as long as the left believes as obama does that “you didn’t create that, government did” we will never give credit to our great entrepreneurs, millions of small business owners, and our competitive international corporations.

God blessed our country with fantastic natural resources and the men who wrote an enlightened constitution.

No matter how hard the left tries, they simply can not keep us on our knees. We are a great country because of our great people. Politicians like to take credit for what The People have accomplished.

Now is the time for this nation to rise above our petty squabbles over race and social issues. Soon we will have a new government, and if enlightened people occupy positions of power, rather than the usual spend and regulate crowd, this nation will lead the world to peace and prosperity.

Posted by: Royal Flush at December 26, 2014 7:34 PM
Comment #386963

57 consecutive months of private job growth makes this the best private sector job creation performance in American history.

The unemployment rate has been reduced faster than it was during the Reagan presidency.

During the Reagan presidency, the stock market increased 190% in eight years. Under Obama, it has increases 220% in 5 1/2 years.

It is, quite simply, the best economy in the modern era by virtually any criteria. It has set records for its length and the magnitude of the growth.

C&J,
The drop in oil prices only occurred in the past six months. Obviously Obama’s energy policies have been successful, but to attribute it to the frackers, who will be out of business by this time next year, makes no sense.

Royal Flush,
Given the strength of the American economy and its remarkable performance under the Obama administration, why would we want to change back to the conservative agenda, and deregulate? That makes no sense either.

Posted by: phx8 at December 27, 2014 3:38 PM
Comment #386964

By the way, this article is a good example of the capitulation phase in the economic cycle. We have moved from despair in 2008-2009, to disbelief, to acceptance, to capitulation.

Next we look for signs of euphoria. Look for froth, bubbles, that kind of thing. Given the sweet spot we are currently in, it may take a year or two, or maybe even more.

Paging Hillary Clinton! Paging Hillary Clinton! The measurements for the new drapes in the oval office just arrived!

Posted by: phx8 at December 27, 2014 3:41 PM
Comment #386965

She should use the old drapes and china she pilfered last time.

Posted by: Weary Willie at December 27, 2014 4:31 PM
Comment #386966

Thanks Weary for the great laugh. Obama said we need a candidate with that “new car smell.” She has that three day old fish smell.

Posted by: Royal Flush at December 27, 2014 6:12 PM
Comment #386967

Conservatives: do a search and find out what your pundits and Republican politicians said about the economy in the past. Check their predictions, and match it up with today. How did they do?

They got it wrong. You know it. This comes with capitulation. Even Drudge is running headlines about how good the economy is now. It is impossible to deny anymore. Obama has hit it out of the park.

So the question is this: if everyone you listen to gets it wrong, and makes bad predictions, then what is the point of listening to them? If Romney and Politico conservatives and Gingrich and Krauthammer and virtually every Republican politician or pundit blew it, and blew it badly, isn’t it time to stop following them?

The predictions about the debt were wrong. The predictions about deficits were wrong. The predictions about a slow recovery were wrong. Unemployment- wrong. Job creation- wrong. Inflation- wrong. The list goes on and on.

Posted by: phx8 at December 27, 2014 8:03 PM
Comment #386968

phx8

NOBODY properly predicts the economy. My favorite is fracking, which nobody foresaw. AND the American energy boom is responsible for most of the happy results we see today.

Recall the summer of recovery in 2010 or the unemployment rate predicted by liberals.

I don’t blame liberals or conservatives for not being able to predict. It is too complex to be predicted in anything but very broad strokes.

Your question - So the question is this: if everyone you listen to gets it wrong, and makes bad predictions, then what is the point of listening to them?

Exactly. The economy is too hard to predict. That is why we should just not do it. Keep things as simple as possible, get the basics right and do not try to fine tune.

You give credit to Obama. What did he do to make this happen? He jumped late onto the fracking wagon, and then still not very enthusiastically. His opposition to pipelines probably will slow development.

His stimulus did nothing in the long term. His regulations will need to be redone. His ObamaCare will need to be redone.

So I agree with you about conservative predictions AND about liberal predictions. Nobody can do it right, so maybe we should stop trying to do it. Embrace complexity and uncertainty. If we recognize our boundary conditions, we can do a better job of adapting. We cannot plan in detail; we cannot avoid all pitfalls. What we can do is be robust enough to overcome them. That is what the free market does so much better than anything else.

Posted by: C&J at December 28, 2014 10:56 AM
Comment #386969

phx8

And do look at the headline above. This is the best quarter since 2003, i.e. 2003 was better. I suppose you were equally optimistic then and crediting the wise policies of the president and congress.

Posted by: C&J at December 28, 2014 10:58 AM
Comment #386970

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Posted by: uiYRH at December 28, 2014 11:15 AM
Comment #386977

Isn’t it funny how the economy gets portrayed in the media? It’s a complicit media that determines whether the economy is good or bad.

Look at the facts:

George H.W. Bush had a 4-5% growth rate when he was president but the media butchered him with the “No New Taxes” thing. Never mind the “New Taxes” only effected about 100,000 people. It was portrayed in the media like he burned the entire country and destroyed a thriving economy with a small luxury tax.

Next, Bill Clinton is portrayed as the greatest president in the modern world because of his mediocre economic performance with no mention of a combative Republican Congress leading the way.

Then, George W. Bush had a very respectable growth rate of over 4% but the media, beginning in 2003, constantly insisted it was the worst economy in recent history and for years continued to parrot the doom and gloom. They had to add on the impression we “lost” the war in Iraq to finally convince the American people he was some sort of incompetent boob who didn’t belong in the WH.

You are correct, C&J, you can’t predict the economy. But, with a complicit media you can hammer the impression of a bad or good economy into the minds of the American people who will eventually believe what they’re being told.

Posted by: Weary Willie at December 28, 2014 3:47 PM
Comment #386978

It is an interesting question: why was there so little optimism at the end of 2003, when the GDP increased by 7.2% in just one quarter? Why wasn’t any crediting the president and Republican congress for their wise policies?

At the end of 2003, the DJIA stood at 10,000, roughly the same level when Bush took office. In the period between 2003 and October 2007, the DJIA increased from 10,000 to 14,000, an increase of 40%. That looks pretty tame compared with the 220% increase in 5 1/2 years under Obama. Where was the optimism?

1. Outsourcing & offshoring. The loss of IT jobs to outsourcing was the story of the year in 2003. It grew worse. As a result, the private sector did not create jobs in this country the way it did in previous recoveries. In just one year, the US offshored 50,000 manufacturing plants. Not jobs. Plants. The growth in the job market was fueled by government jobs, mostly military & TSA.

2. Debt. When Bush took office the federal deficit had been eliminated, the debt stabilized, and there was a projected budget surplus in 10 years of $10 trillion. By 2003, we were running deficits again and the debt was growing. This was due to two factors, tax cuts and the War in Iraq.

3. Tax cuts. The second round of tax cuts in 2003 created a huge short-term economic stimulus, but terrible long-term problems, as we all found out to our sorrow. There was also a health care ‘reform’ which caused huge debts.

4. The War in Iraq. It also contributed to deficits and debts, and 2003 was only the beginning. The cost of the war was charged in its entirety on the American credit card. The aftermath of 9/11 also might have played a part in the general lack of optimism.

The First Bush Recession officially lasted from March to November 2001. However, non-farm payrolls for 2003 resulted in a net increase of only 63,000 jobs. That was for the entire year.

http://www.forexabode.com/forexblog/historical-research/historical-nonfarm-payroll-data-an-insight/

There is a good reason virtually the only economic positive Bush could tout in the 2004 presidential campaign was the increase in home ownership through the ‘ownership society.’
We were well on our way to a very bad result, with a pubic and private debt-fueled recovery, lack of private job creation due to offshoring/outsourcing, and a War in Iraq that was not going as planned.

Posted by: phx8 at December 28, 2014 3:52 PM
Comment #386979

Why isn’t it called the last Clinton Recession?

I think phx8’s comment about the so-called “first Bush Recession” makes my point about the media’s role in how the economy is portrayed.

Heck! It was almost four years into Obama’s presidency and they were still blaming Bush for the poor economic performance.

Why the double standard when describing the state of the economy?

Because Democratics can’t survive as a party without beating up the opposition.

Posted by: Weary Willie at December 28, 2014 4:36 PM
Comment #386980

WW,
It is not ‘the media.’ It is not a liberal bias, unless we can all agree “reality has a liberal bias.” It is just a matter of facts, numbers, and even those damnable statistics.

I call it the First Bush Recession for two reasons: 1) to distinguish it from the second one, the Great Recession, and 2) It happened during Bush’s administration, from March to November of 2001. If not for 9/11, it might not even have qualified as a recession.

The economic downturn under Bush #41 was mild, but it was accompanied by increasing debt. Once again, the culprits were earlier tax cuts and the deregulation of Savings & Loans, which led to the collapse of many of those institutions at taxpayer expense.

Notice a patter?

If Bush #41 could have held elections a year earlier, he would almost certainly have won due to his popularity over the conduct of the War with Iraq.

Unlike Bush #43.

However, Bush #41 attempted to address the increasing debt by reneging on his oft repeated pledge: “Read my lips. No new taxes.” At the time, it was actually the financially responsible thing to do. Unfortunately, he made a very public promise into the mainstay of his political campaign, and then broke his promise. Liberals creamed him. Conservatives creamed him too. And he deserved it. He was also woefully out of touch with the common man. He really just didn’t get what life was like for most Americans. But all in all, Bush #41 was a competent president whose administration has become a historical footnote.

The critical turning point in the Clinton administration was the tax hike of the 2003 Omnibus bill. It cost Clinton control of Congress, but resurrected a slow economy, ultimately resulting in 23 million jobs created in eight years.

The economy inherited by Obama was unlike anything we’ve seen in modern history. It was the worst since the Great Depression. Read up on the unemployment numbers, rates, GDP, and so on.

Every day, everyone of us should thank our lucky stars the Obama administration saved this country. The conservatives brought America to its knees. Obama and the liberals put us back on our feet.

That is not media bias. That is fact. That is what happened.

Posted by: phx8 at December 28, 2014 5:14 PM
Comment #386981

I’m assuming you fat fingered this date:

The critical turning point in the Clinton administration was the tax hike of the 2003 Omnibus bill.

If you’re talking about the Clinton administration (1993-2001) you are again making my point about how it’s being portrayed in the media. You refer to the gains of the Clinton administration are a result of the man, Bill Clinton. You completely ignore the Republican majorities in the House and the Senate and their “Contract with America”.

Posted by: Weary Willie at December 28, 2014 5:44 PM
Comment #386983

Phx8

HOW did Obama save the country? What process did he use, i.e. what process did he say he was using that worked? We know that the American energy boom was a really big deal. Can you find for me Obama’s push for drilling for more oil and gas in his first couple years? I recall most lefties opposed fracking and still do.

Posted by: C&J at December 28, 2014 6:06 PM
Comment #386984

phx8

Another thing are the economy and predicting. This big growth spurt was supposed to take place in the summer of recovery, i.e. 2010. If you wait long enough, almost anything can happen. The Obama folks cannot understand the economy enough to make predictions and the implies not enough to plan it. It is like predicting rain every day and then claiming prescience when it finally does

I know you hate Bush. But things looked good in 2003 too. We don’t know what will happen in the future, because none of us, not you or me or Obama folks, can understand the complexity. Maybe better for us to be more humble. Obama predictions are about the same as random chance. Actually a little worse.

Posted by: C&J at December 28, 2014 6:11 PM
Comment #386985
We don’t know what will happen in the future,

I do!

Democratics will moan and groan and accuse Republicans of stifling “progress”, and when progress is made Democratics will take credit for it.

It’s been happening for 40 years that I have personally experienced. It’s most likely been happening for the last century, if not longer.

Posted by: Weary Willie at December 28, 2014 6:43 PM
Comment #386988

test

Posted by: phx8 at December 28, 2014 8:14 PM
Comment #386999

Liberals now apparently love the 1 percenters.

Posted by: Royal Flush at December 29, 2014 4:05 PM
Comment #387000

RF,
The problem with the 1% is not that they exist; there will always be one percent of whatever we look at. The problem is that, despite huge gains in worker productivity and longer work weeks, American workers wages have remained flat for decades. ‘Trickle Down’ economics never happened. All of the gains and profits have gone to a very, very small portion of society.

C&J,
Suggesting that I ‘hate’ Bush is a convenient way of denying the validity of my opinions, as if they were merely irrational emotional reactions.

I dislike Bush and his administration for their policies. They inherited an economy with a balanced budget and a projected $10 trillion surplus over ten years, and by cutting taxes & deregulating, turned the balanced budget into a trillion dollar deficit. They doubled the national debt. They waged an invasion of Iraq based upon false pretenses, resulting in the deaths of thousands of Americans, hundreds of thousands of Iraqis, countless wounded, millions of homeless… I dislike Bush policies that offshore/outsourced millions of American jobs, generating profits for the 1% while leaving American workers out in the cold. I dislike the Bush administration’s denial of Climate Change for most of those years. I dislike crashing the economy i9n 2008, and watching the economy lose hundreds of thousands of jobs per month.

Economist can make good predictions. Listen to the Keynesians. Economist can make bad predictions. If you want bad ones, listen to the supply siders.

Right now, the GOP is trying to oust the non-partisan head of the CBO, a guy named Elmendorf, and replace him with someone more friendly to ‘dynamic scoring’ and supply sider mythology. That is how you end up with bad economic policy, a crashed economy, and conservatives throwing up their hands and declaring how no one can predict it. Baloney.

Posted by: phx8 at December 29, 2014 5:39 PM
Comment #387001

obama explains the huge democrat election loss in November.

“I think we had a great record for members of Congress to run on and I don’t think we — myself and the Democratic Party — made as good of a case as we should have,” Obama said. “And you know, as a consequence, we had really low voter turnout, and the results were bad.”

Really chief, no one could make a case for your crazy and harmful policies? I wonder what case Hillary can make that informed voters will believe.

Bragging on Wall Street success and then blaming them in the same paragraph is idiotic.

Posted by: Royal Flush at December 29, 2014 6:05 PM
Comment #387002

phx8

They inherited an economy already heading down. It started in March of 2000. Then we had 9/11. The whole country went nuts. I recall that I was criticized by once and future liberal friends for being too moderate.

All those Democrats who controlled the Senate in 2002 believed the same as Bush did. Recall, that many of them had more international experience than Bush.

Mistakes were indeed made. To blame Bush is silly.

Re predictions - the Keynesian have not been right since the 1960s. That is why they lost ground. Recall the Summer of Recovery in 2010. The funny thing about the current recovery is that it goes so much against the Keynesian ideas. We didn’t get the rise when we stimulated and we got it after the sequester.

Actually, the big stimulus is the American energy boom.

I am aware of the CBO and dynamic scoring. There is more to the story than your simple version. We do need to figure in the changes in behavior that a policy will provoke. Exactly how they do that is a question. That they need to do it is not in doubt

Posted by: C&J at December 29, 2014 6:06 PM
Comment #387003

C&J,
“They inherited an economy already heading down. It started in March of 2000.”

The first thing the new Republican congress did was issue a refund because they were collecting too much in taxes- a surplus. Tax cuts were implemented because we were collecting too much in revenues. The Heritage Foundation claimed the tax cuts in 2001 would result in the complete elimination of the national debt by 2010.

Boy, were they wrong.

Enter the revisionists…

Did you know most Republicans- 85%- believe federal deficits have increased under Obama? A recent poll showed this. The question made it clear they were asking about deficits, not the debt, yet the vast majority of Republicans believe things about the economy which are absolutely, completely untrue. Federal deficits have been reduced every year under Obama, down about 2/3 from when he took office.

You write: “Re predictions - the Keynesian have not been right since the 1960s. That is why they lost ground. Recall the Summer of Recovery in 2010. The funny thing about the current recovery is that it goes so much against the Keynesian ideas. We didn’t get the rise when we stimulated and we got it after the sequester.”

And that is why you never seem to get it right when it comes to the economy. The whole world of economics seems random. Why? Garbage in, garbage out. Take bad assumptions and wrong facts, and they become bad predictions and bad results. Surely you must wonder why you get it wrong time and again, and yet, I keep getting it right.

RF,
Re Obama’s “… crazy and harmful policies.” Can you name one? Better yet, can you name one and back it up with one hard fact?

Posted by: phx8 at December 29, 2014 11:33 PM
Comment #387004

phx8

Re “refund” they were wrong in their projections, just as Obama was wrong in 2009 with his projections.

I am not saying Republicans are good at predicting. NOBODY is good at predicting. That is why we should just cut it out. Go with the general programs and understand that politicians cannot create jobs or prosperity in anything but broad form and long time periods. We still live off the work of our grandparents and before, as our kids will live off of us. We have the responsibly to act reasonably, but recognize that it will make a difference in the long term.

You may have used an old shower. You turn on the hot water and it stays cold. If you turn on more hot water, when gets too hot. You can turn it down again and up again and never get it right. Or you can make basic good decisions and tolerate the hot or cold until it improves. This water example is very simple. The complex economy is much worse.

Re Federal deficits - people often mistake Federal deficits for debt. Debt has been growing.

Deficits have been falling, interestingly w/o a big tax increase. I am happy the crisis seems to have passed. What do you think Obama did to create this happy state of affairs? According to you, the Republicans stopped him from doing all the needful things. What mechanism did he use? We had the stimulus. We had sequester. What has been really holding it all together is the Fed. They are buying the debt and monetizing it. This works for a while.

Posted by: C&J at December 30, 2014 12:36 AM
Comment #387006

C&J,
We have essentially been growing our way to prosperity through Keynesian economic policies, such as the stimulus, TARP, cash for clunkers, bailouts for AIG & GM, an accommodative Federal Reserve, and Quantitative Easing, along with extraordinarily low interest rates.

The biggest slowdowns have occurred when the GOP has thrown in roadblocks. When the GOP refused to approve the stimulus, the stock market took its single biggest one-day loss in history. The GOP insistence on tax cuts instead of spending made the original stimulus less effective; it worked, just not as well as it could have. The biggest slump in the economy during the Obama years came when the GOP threatened default on the federal debt, eventually resulting in a downgrade of US debt by a ratings agency. The compromise- the sequester- was an unloved economic orphan; when it worked, everyone wanted credit, and when it failed, no one wanted anything to do with it.

There was one tax increase, when the Bush tax cuts expired, and were re-instated with a higher rate for the top bracket.

“What has been really holding it all together is the Fed.”
Yes, they deserve a lot of credit. They have resisted the urge to repeat the mistake of 1937, when attention turned from growth to the debt. It was a terrible mistake, and reignited the Great Depression with a vengeance.

Posted by: phx8 at December 30, 2014 1:05 AM
Comment #387010

phx8

Clunkers was a failure. Quantitative easing is mostly monetarist, as are low interest rates. Bailouts are on the way to crony capitalism. It has been a dog’s breakfast of measures, some of which Obama did (clunkers & bailouts).

But the biggest one was the energy boom. Obama didn’t prevent it. I give him credit for not being as nutty as many of his followers.

Most of what was needed to avoid the downturn was in place when Obama took office and/or done by the Fed.

Posted by: C&J at December 30, 2014 7:24 PM
Comment #387012

Conservatives blamed Obama for rising gas prices in the run-up to the 2012 presidential election. To be fair, they should give him the credit for the current drop.

But I’ll say it again. The current drop is not about the Obama administration’s policies. The Saudis are flooding the markets. If you don’t understand that, you’ll make a lot of bad decisions, and the same goes for the US. The Saudis want to maintain market share, and they want to ensure US dependence on oil. They are out to kill electric cars and alternative energies, including solar, wind, and shale oils.

It will be harder to address Global Warming with oil prices becoming so affordable. What is happening is a short-term boon for America, but a long-term disaster, and I think we will be powerless to resist it, even though it spells disaster for us in the long run.

Posted by: phx8 at December 30, 2014 11:50 PM
Comment #387014

Fossil fuel in U.S. ground and not used is like money in the bank.

OPEC squandering its fossil fuel to lower global prices does nothing to diminish the value to us of our resources untapped. It serves to diminish the income of OPEC which for some of its members will cause much citizenry unrest.

The logical position is to welcome cheap OPEC oil while we hold ours in reserve.

Posted by: Royal Flush at December 31, 2014 12:26 PM
Comment #387015

Perhaps my learned liberal equity and commodity trader can explain how one crashes prices to successfully increase prices.

Posted by: Royal Flush at December 31, 2014 1:20 PM
Comment #387016

RF,
It is a business practice to gain market share. Amazon is doing the same thing to retail. They offer products online at artificially low prices and destroy brick-and-mortar competition. Amazon has billions in cash. They can absorb losses for longer than the competition. When the competitors die, Amazon owns most of the market.

The Saudis provide higher quality oil at cheaper prices, and for all practical purposes, they can do that as long as they want, at $40/bbl or lower. US oil shales, Alberta tar sands, and others have much higher break-evens, often $70/bbl or more.

The oil producers in the US probably hedge their production to guarantee delivery at future prices, but hedging will probably only protect them for a year; after that, they’re toast. Supposedly a lot of the drillers are heavily leveraged and have a lot of debt, and will go down soon. I really don’t know about that. Guess we’ll find out.

By the way, although I once had a Series 3 commodity license, that was a long time ago, and I don’t trade commodities. They say the best way to make a million in commodities is to start with two million! Well, it is possible to make money speculating, but I do not go there. It is far wiser to be on the safe side and hedge in order to protect a product’s future delivery price.

Posted by: phx8 at December 31, 2014 2:44 PM
Comment #387017

The big fallacy and distorted logic is that OPEC can, with continued surplus production, destroy our fossil resources. That’s not going to happen. Oil and gas don’t rot in the ground. Very likely those resources will appreciate in value over time.

Should OPEC gain total market share they will bankrupt many members and our resources will remain in the ground for later use.

Amazon has not accumulated billions in cash by selling below cost. To believe that Amazon can drive all other internet retailers out of business with unprofitable prices is silly.

I bought my wife a new Coach hand bag for Christmas…not from Amazon, but from another internet seller for a better price. The same is true for Coach leather moisturizer and conditioner. Amazon asked $19 per 6 ounce bottle while Coach was retailing their own product for $10.

The retail gas station gas wars of my youth are a great example of the fallacy of your opinion. Very few retail stations failed due to the gas price wars. All suffered and the gas wars soon ended.

Posted by: Royal Flush at December 31, 2014 3:27 PM
Comment #387018

A HAPPY NEW YEAR to all at Watchblog. 2015 will be very interesting.

Posted by: Royal Flush at December 31, 2014 3:31 PM
Comment #387019

OPEC- specifically, Saudi Arabia- is not destroying what is under the ground in the US. This is about destroying the businesses that try to compete with them, and undercut sources of alternative energies that will be threats in the future.

Amazon has billions, and it loses a lot of money each quarter. Meanwhile, Borders is gone and Barnes and Noble will be gone soon too. They will soon control publishing, since there is no way agents and book publishers can compete with Amazon. There are online competitors, but the others are much smaller- they have smaller inventories.

Retail gas wars… How many independents are still in the business? Big Oil won that battle decisively.

And Happy New Year to all!

And Go Ducks!

Posted by: phx8 at December 31, 2014 4:15 PM
Comment #387020

Crude oil production from U.S. wells is poised to approach a 42-year record next year as drillers ignore the recent decline in price pointing them in the opposite direction.

U.S. energy producers plan to pump more crude in 2015 as declining equipment costs and enhanced drilling techniques more than offset the collapse in oil markets, said Troy Eckard, whose Eckard Global LLC owns stakes in more than 260 North Dakota shale wells.

Oil companies, while trimming 2015 budgets to cope with the lowest crude prices in five years, are also shifting their focus to their most-prolific, lowest-cost fields, which means extracting more oil with fewer drilling rigs, said Goldman Sachs Group Inc. Global giant Exxon Mobil Corp. (XOM), the largest U.S. energy company, will increase oil production next year by the biggest margin since 2010. So far, the Organization of Petroleum Exporting Countries’ month-old bet that American drillers would be crushed by cratering prices has been a bust.

Posted by: Royal Flush at December 31, 2014 5:03 PM
Comment #387021

Eckard talks a good story. His LLC is involved in the Bakken shale oil fields. He plans on still being there after the weak players fold. There is a lot of good news and bad news in this article, RF:

http://www.bloomberg.com/news/2014-12-04/opec-shale-showdown-misses-target-as-u-s-drillers-cap-costs.html

For example:

“Shale explorers have seen their market value fall by more than $150 billion since June as investors worried about disappearing cash flow and whether companies that borrowed heavily to amass drilling acreage, hire crews and lease rigs can survive lower oil prices.

Some drillers have relied on debt to buy drilling rights and rent rigs, doubling energy bonds’ share of the high-yield market to 17 percent since 2008, according to an Oct. 14 report by Citigroup Inc. The $90 billion of debt issued by junk-rated energy producers in the past three years has fallen 13 percent since the crude rout began in June.

Because the amount that drillers can borrow from bank lenders is tied to the value of their reserves, falling prices increase the risk they’ll face a cash squeeze…”

BTW, that article was written when oil was $66/bbl. It is now down to the low $50’s. Nevertheless, some of the oil fields operate with very low break-evens, including three of the largest: Bakken, Eagle Ford, and Permian.

I like low oil prices for the help it gives our economy in the short-term. And I do not particularly care for the Saudis.

I like seeing low oil prices stick it to the Russians. They are getting absolutely creamed, and they deserve it for violating international law in the Ukraine and Crimea. They are well on their way to economic depression, with the ruble having already lost half its value. Let’s see how Putin does when there is no longer enough money for food, or to pay soldiers. Nationalism will not be so much fun when everybody is cold and hungry.

I like seeing low oil prices stick it to the Iranians.
Sanctions on top of low oil prices are crippling. Watch them cave at the negotiating table when it comes to nukes.

My biggest concern is for the long-term, and Global Warming…

Posted by: phx8 at December 31, 2014 6:19 PM
Comment #387044

HAPPY NEW YEAR TO EVERYONE

Posted by: Royal Flush at January 1, 2015 2:53 PM
Comment #387045

“You completely ignore the Republican majorities in the House and the Senate and their “Contract with America””

No, Weary, Phx8 did not ignore the Republican majorities nor the “contract with America” because they had not happened yet.

The five year Deficit Reduction Act of 1993 was proposed by Clinton and passed by a majority Democratic Congress. It reduced federal expenditures by 5% per year for a five year period and increased upper income taxes.

It was politically costly to the Democrats who lost control of Congress in the 1994 elections. But, it is undeniably the correct thing to do after the explosive deficit spending of the Reagan era. I am not being critical of Reagan. He did the right thing during a severe recession. But, it was time to bring the deficit down as interest rates began to climb choking off private investment.

A brief note about GH Bush. He was abandoned by his party for attempting to do what Clinton and the Democrats did in 1993. Indeed, the Clinton Deficit Reduction Act is modeled after the proposals of the GH Bush administration.


Posted by: Rich at January 2, 2015 10:03 PM
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