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Citi strategist warns of 'Oilmageddon'



The selloff on Wall Street continued Friday, with the Dow closing down 211.75 points, ending at 16,204.83, off 1.29 percent.

A CNBC article posted Friday as the top headline on the Drudge Report warned that the global economy is trapped in a “death spiral” dubbed by Citibank strategist Jonathan Stubb as “Oilmageddon” – referring to the dramatic drop in world oil prices and the possibility of a global economic meltdown, or “Armageddon.”

“The world appears to be trapped in a circular reference death spiral,” Citi strategists led by Jonathan Stubbs said in a report Thursday, as reported by CNBC.

“Stronger U.S. dollar, weaker oil/commodity prices, weaker world trade/petrodollar liquidity, weaker EM (and global growth) … and repeat. Ad infinitum, this would lead to Oilmageddon, a ‘significant and synchronized’ global recession and a proper modern-day equity bear market.”

Stubbs noted crude oil prices have tumbled by about 70 percent since the middle of 2014. The dollar, meanwhile, has risen about 20 percent against an international basket of currencies, with the prospect the world economy will grow sluggishly, increasing only by 2.7 percent in 2016, half the growth Citi projected only last month.

Minimum wage jobs and foreign workers

Meanwhile, popular economic blog ZeroHedge.com took the air out of President Obama’s announcement Friday that unemployment has fallen to 4.9 percent by pointing out that 70 percent of the job gains in January went to minimum-wage workers.

ZeroHedge.com further reported that 1.4 million relatively high-paying manufacturing jobs lost by the U.S. economy since December 2007 have been replaced by 1.6 million relatively low-paying waiter and bartender jobs created in the U.S. economy.

Since December 2007, considered by many to be the start of the current prolonged recession that ZeroHedge.com suggests has the possibility of developing into a second Great Depression, all job gains in the U.S. economy have gone to foreign-born workers.

According to the Bureau of Labor Statistics, since December 2007, the U.S. has added just 186,000 native-born workers while adding 2.5 million foreign workers.

Reasons for the 2016 stock market crash

What appears to be shaping up as the “Crash of 2016” is being blamed on a historic drop in oil prices and the fall of Chinese currency.

The price of crude oil has plunged to $26.30 a barrel, its lowest since May 2003. The problem today clearly is a global oil oversupply that has discredited the “peak oil” fears of previous decades that the world was exhausting the supply.

In January, China allowed the biggest fall in the yuan in five months, causing trading in its stock market to be suspended twice. China’s currency has continued to drop since a 2 percent devaluation last August touched off a global stock-market selloff that prefigured what global equity markets are experiencing in January.

On Feb. 2, Bloomberg reported the Chinese government is stepping up efforts to ward off a potential economic crisis in which an estimated $1 trillion in capital outflows left China last year and mounting bad debts threaten to cripple the Chinese banking system.

On Dec. 16, 2015, the Federal Reserve Open Market Committee decided to raise rates for the first time since June 29, 2006, increasing the target federal funds rate modestly, from zero to 25 basis points (0.25 points).

WND has reported analysts’ warnings that the Federal Reserve’s quantitative easing policy – under which it printed money to buy U.S. Treasury debt – was an artificial means to contain interest rates at near zero that would backfire in a broad stock-market selloff once the Fed began to raise benchmark interest rates.

As WND reported last month, William White, the Swiss-based chairman of the OECD’s review committee and former chief economist of the Bank of International Settlements, has warned that the global financial system has become dangerously unstable, facing “an avalanche of bankruptcies” worse than 2007 at a time when central banks have run out of “macroeconomic ammunition” to fight downturns.

“Debts have continued to build up over the last eight years and they have reached such levels in every part of the world that they have become a potent cause for mischief,” White said.

“It will become obvious in the next recession that many of these debts will never be serviced or repaid, and this will be uncomfortable for a lot of people who think they own assets that are worth something,” he cautioned.

White noted European banks already have admitted to holding $1 trillion of non-performing loans.

“The only question is whether we are able to look reality in the eye and face what is coming in an orderly fashion, or whether it will be disorderly,” he said. “Debt jubilees have been going on for 5,000 years, as far back as the Sumerians.”

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