A very insightful post at Zerohedge, well worth the read.
We have been saying it for weeks, and todayÂ even the WSJÂ jumped on the bandwagon:Â the sole reason why crude prices are surgingÂ (RIP European profit margins: with EUR Brent at a record, we can only assume the ECB will pull a 2011 and hike rates in 3-4 months even as it pumps trillions in PIIGS, banks bailout liquidity)Â is because global liquidity has risen by $2 trillion in a few short months, on the most epic shadow liquidity tsunami launched in history in lieu of QE3Â (discussed extensively here in our words, butÂ here are JPM‘s). Luckily, the market is finally waking up to this, and just as world central banks were preparing to offset deflation, they will instead have to deal with spiking inflation, because the market may have a short memory, itcanÂ remember what happened just about this time in 2011. And the problem is that when it comes to the inflation trade, the market, unlike in most other instances, can be fast – blazing fast, at anticipating what the central planning collective’s next step will be, after all there is only one. And if Bank of America is correct, that next step could well lead to the same unprecedented economic catastrophe that we saw back in 2008, only worse:Â $200 oil. Note -Â this is completely independent of what happens in Iran,Â and is 100% dependent on what happens in the 3rd subbasement of the Marriner Eccles building. Throw in an Iran war and all bets are off. Needless to say, an epic deflationary shock willÂ need to follow immediately,Â just as in 2008, which means that, in keeping with the tradition of being 6-9 months ahead of the market, our question today is – which bank will be 2012’s sacrificial Lehman to set off the latest and greatest deflationary collapse and send crude plunging to $30 just after it hits $200.
Of course the watermelons among us will probably blame it on “peak oil”, the technocratic myth.