Speculation or "mal-investment" is nothing new and neither are debt jubilees. These were common before deposit taking banks in the 1700s England started mass speculation as we know it today.
Walter Bagehot explained it with the accuracy of a practioner not a professor in the 1800s.
"Lord Macaulay has graphically described one of the periods of excess. He says—'During the interval between the Restoration and the Revolution the riches of the nation had been rapidly increasing. Thousands of busy men found every Christmas that, after the expenses of the year's housekeeping had been defrayed out of the year's income, a surplus remained; and how that surplus was to be employed was a question of some difficulty. In our time, to invest such a surplus, at something more than three per cent, on the best security that has ever been known in the world, is the work of a few minutes. But in the seventeenth century, a lawyer, a physician, a retired merchant, who had saved some thousands, and who wished to place them safely and profitably, was often greatly embarrassed. Three generations earlier, a man who had accumulated wealth in a profession generally purchased real property, or lent his savings on mortgage. But the number of acres in the kingdom had remained the same; and the value of those acres, though it had greatly increased, had by no means increased so fast as the quantity of capital which was seeking for employment. Many too wished to put their money where they could find it at an hour's notice, and looked about for some species of property which could be more readily transferred than a house or a field. A capitalist might lend on bottomry or on personal security; but, if he did so, he ran a great risk of losing interest and principal. There were a few joint stock companies, among which the East India Company held the foremost place; but the demand for the stock of such companies was far greater than the supply. Indeed the cry for a new East India Company was chiefly raised by persons who had found difficulty in placing their savings at interest on good security. So great was that difficulty that the practice of hoarding was common. We are told that the father of Pope, the poet, who retired from business in the City about the time of the Revolution, carried to a retreat in the country a strong box containing near twenty thousand pounds, and took out from time to time what was required for household expenses; and it is highly probable that this was not a solitary case. At present the quantity of coin which is hoarded by private persons is so small, that it would, if brought forth, make no perceptible addition to the circulation. But, in the earlier part of the reign of William the Third, all the greatest writers on currency were of opinion that a very considerable mass of gold and silver was hidden in secret drawers and behind wainscots. 'The natural effect of this state of things was that a crowd of projectors, ingenious and absurd, honest and knavish, employed themselves in devising new schemes for the employment of redundant capital. It was about the year 1688 that the word stockjobber was first heard in London. In the short space of four years a crowd of companies, every one of which confidently held out to subscribers the hope of immense gains, sprang into existence—the Insurance Company, the Paper Company, the Lutestring Company, the Pearl Fishery Company, the Glass Bottle Company, the Alum Company, the Blythe Coal Company, the Swordblade Company. There was a Tapestry Company, which would soon furnish pretty hangings for all the parlours of the middle class, and for all the bed-chambers of the higher. There was a Copper Company, which proposed to explore the mines of England, and held out a hope that they would prove not less valuable than those of Potosi. There was a Diving Company, which undertook to bring up precious effects from shipwrecked vessels, and which announced that it had laid in a stock of wonderful machines resembling complete suits of armour. In front of the helmet was a huge glass eye like that of a Cyclops; and out of the crest went a pipe through which the air was to be admitted. The whole process was exhibited on the Thames. Fine gentlemen and fine ladies were invited to the show, were hospitably regaled, and were delighted by seeing the divers in their panoply descend into the river and return laden with old iron and ship's tackle. There was a Greenland Fishing Company, which could not fail to drive the Dutch whalers and herring busses out of the Northern Ocean. There was a Tanning Company, which promised to furnish leather superior to the best that was brought from Turkey or Russia. There was a society which undertook the office of giving gentlemen a liberal education on low terms, and which assumed the sounding name of the Royal Academies Company. In a pompous advertisement it was announced that the directors of the Royal Academies Company had engaged the best masters in every branch of knowledge, and were about to issue twenty thousand tickets at twenty shillings each. There was to be a lottery—two thousand prizes were to be drawn; and the fortunate holders of the prizes were to be taught, at the charge of the Company, Latin, Greek, Hebrew, French, Spanish, conic sections, trigonometry, heraldry, japaning, fortification, bookkeeping, and the art of playing the theorbo.' The panic was forgotten till Lord Macaulay revived the memory of it. But, in fact, in the South Sea Bubble, which has always been remembered, the form was the same, only a little more extravagant; the companies in that mania were for objects such as these:—' "Wrecks to be fished for on the Irish Coast—Insurance of Horses and other Cattle (two millions)—Insurance of Losses by Servants—To make Salt Water Fresh—For building of Hospitals for Bastard Children—For building of Ships against Pirates—For making of Oil from Sun-flower Seeds—For improving of Malt Liquors—For recovery of Seamen's Wages—For extracting of Silver from Lead—For the transmuting of Quicksilver into a malleable and fine Metal—For making of Iron with Pit-coal—For importing a Number of large Jack Asses from Spain—For trading in Human Hair—For fatting of Hogs—For a Wheel of Perpetual Motion." But the most strange of all, perhaps, was "For an Undertaking which shall in due time be revealed." Each subscriber was to pay down two guineas, and hereafter to receive a share of one hundred, with a disclosure of the object; and so tempting was the offer, that 1,000 of these subscriptions were paid the same morning, with which the projector went off in the afternoon.' In 1825 there were speculations in companies nearly as wild, and just before 1866 there were some of a like nature, though not equally extravagant. The fact is, that the owners of savings not finding, in adequate quantities, their usual kind of investments, rush into anything that promises speciously, and when they find that these specious investments can be disposed of at a high profit, they rush into them more and more. The first taste is for high interest, but that taste soon becomes secondary. There is a second appetite for large gains to be made by selling the principal which is to yield the interest. So long as such sales can be effected the mania continues; when it ceases to be possible to effect them, ruin begins. So long as the savings remain in possession of their owners, these hazardous gamblings in speculative undertakings are almost the whole effect of an excess of accumulation over tested investment. Little effect is produced on the general trade of the country. The owners of the savings are too scattered and far from the market to change the majority of mercantile transactions. But when these savings come to be lodged in the hands of bankers, a much wider result is produced. Bankers are close to mercantile life; they are always ready to lend on good mercantile securities; they wish to lend on such securities a large part of the money entrusted to them. When, therefore, the money so entrusted is unusually large, and when it long continues so, the general trade of the country is, in the course of time, changed. Bankers are daily more and more ready to lend money to mercantile men; more is lent to such men; more bargains are made in consequence; commodities are more sought after; and, in consequence, prices rise more and more."
Of course modern banks were only the start.
We lost the gold standard with the great depression.
The U.S. destroyed all industrial competition in WWII. Unfortunately Keynes' ideas to balance trade surpluses were discarded as the Americans wanted to dominate world trade.
https://www.theguardian.com/commentisfree/2008/nov/18/lord-keynes-international-monetary-fund
That caused the "America Great" period but the 1970s oil shocks put an end to U.S. surpluses as Yanis Varoufakis puts it the global minotaur was born. Using it's status as the world reserve currency the U.S. would run deficits funded by printing money and default/extract tribute in this way.
That bailed them out of the savings and loan crisis of the 80s, the dotcom bubble and the 2008 GFC. Each set of frauds and bubbles bigger than it's parent and defaulted away with easy money.
The opposite of Bagehot's prescription.
In the GFC case the executives of large companies were responsible for repealing the Glass Steagall which enabled them to perpetuate the gigantic frauds against the public that caused the GFC and derailed the economy.
These frauds were rewarded not with jail time but with hundreds of millions of dollars in bonuses.
Not a single person went to jail for all of that.
That created a massive moral hazard, when you let fraudsters win you run honest businesspeople out of town.
Goldman Sachs did not even have Marc Cohodes' borrow, they just banned shortselling.
WTF.
WTF...
WTF...!!!!s#/&#$&^#//
It's this context together with all the easy money in which the speculative capital flows into tight oil existed.
However the returns have not eventuated and capital discipline is now being imposed on tight oil producers.
The narrative has changed greatly if gradually since I started this thread.
The million dollar question is how quickly can they increase production next year, I already know it's not as quickly as the market expects.
It would be a real shame for me to sell out now just as my positions are truly being vindicated. When what I know is priced into expectations the risk returns to the stock but I won't be selling a minute sooner.
How important is energy as a commodity? It runs our entire economy. Could easily cause a recession when combined with all this debt as you say.
O & G has a value in use it is THE commodity upon which others depend, how much ore is mined without fossil fuel. How much food produced without gas for fertilizer.
How far's that plane gonna fly, that tanker, your car. That east coast smelter, your stove, your fridge.
In a scenario where oil is scarce, debt and high energy prices are tanking the economy - I am holding and will contimue to hold all the cards.
(20min delay)
