Much has been written about the vicious circle which the US was in
while issuing the govt bonds which were lapped up by China. And the ever
present budget deficits required even more govt bonds and more market
access to China in return for purchase of the govt bonds.
Barak Obama put an end to it by supporting manufacturing activity in
US. Making it less dependent on Chinese imports. Manufacturing helped
create jobs in U.S and increase govt revenues. Reducing the need to feed
on chinese financing in exchange for market access.
It was another time matured vicious cycle operating in the energy
markets across the world. Oil , War and military industry. It was hugely
economical for the oil producing countries to have always a burning pit
in their backyard. The investment needed for the scale of violence was
always very small. Small dollars here and there. And this always kept
the oil prices very high. A perceived tension in middle east always cast
a risk on future supply of oil and this increased the oil price. The
perceived threat due to the small small smoking boulders helped the
middle east countries to justify for the heavy military spending. Big
ticket military purchases helped steady flow of grease money from the
armament companies. U.S arms industry was happy, shareholders were
happy, the Sheikhs were happy ( Read good revenue from oil and ‘side’
payments), Israeli was happy because American Jews were happy, American
Jews were happy because their shares in military industry gave good
returns and they are also in energy trading. A small round of shell cost
nothing but a shell going off in Beirut or Syria gave huge returns to
all the above stake holders.
Problem started only when someone else also started playing the same
game. And this time it was Russian president Putin who wanted ticket to
play the same game. He already was a player with his own play in Syria
with some flying birds there.
It was then Putin realised lobbing a dozen shells to Ukraine cost
nothing for him, but it will keep the CIS, Caspian energy markets to
boil. Good returns to Russia. And good excuse increasing military
spending too. He realised this was a all profit game with little loss.
Any game has no value if the trophy is not coveted anymore. Obama
decided to stop playing the game. There is no more fun when others
understand the trick of the game and start playing the same. He decided
to kill the trophy. And here the trophy was Oil. First step was to make
it plenty available. With good institutional support domestic production
exceeded U.S demand. And the next big step was to release Iranian crude
to market. Now this meant if someone plays to cut short supply he will
lose the market share. Israelis, Sheikhs, Jews Russian all are unhappy.
But unlikely that this is going to be like this for long…too many
unhappy people….and the investment needed for the happiness is too small
….a couple of shells to lobbed here and there….Putin had only begun his
game, he will not allow the game to be over soon……That is why I started
buying energy shares…..
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