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Credit Crunch for Shale Drillers

Bloomberg reports on the long-awaited (yet still painfully slow) comeuppance for shale oil companies and the big U.S. banks who have lent to them. Of course, freakishly low interest rates that were too low for too long are in no way related to any of this.

This seems to be the new normal (that is, unless we get a huge rebound in oil prices):

Chesapeake Energy Corp., the deeply indebted shale producer, said that it can hang on to its $4 billion bank line as long as it posts just about everything it owns as collateral.

Yellen: “Not a bubble economy”

It’s hard (for someone like me at least) not to think that Ms. Yellen’s opening comments in the video below will come back to haunt her someday:

This is an economy on a solid course – not a bubble economy…

It could be right up there with Greenspan’s “irrational exuberance” comments back when they could have cooled the late-1990s internet/stock market bubble and, of course, Bernanke’s assurance that “troubles in the subprime sector on the broader housing market will be limited” (and not “limited to planet earth” as Jim Grant once quipped).

It doesn’t appear there are any similar offerings for Volcker.

Yellen and Global Uncertainty

Federal Reserve Chair Janet Yellen appears to have said everything that folks on Wall Street were wanting to hear yesterday as she basically green-lighted a little more asset price inflation at the cost of lower interest rates for just a little bit longer.

Like previous Fed chairs Bernanke and Greenspan, “too low for too long” is not really much of a concern. See also:

CNBC reports that the Janet Yellen Fed has a “mini-revolt” brewing with a total of four Open Market Committee members favoring a more hawkish approach to monetary policy.

Of course, financial markets will have the last say on whether short-term interest rates are raised from their current freakishly low levels and, if so, how fast.

Markets seem to be giving the Fed the go-ahead at the moment, but, as we’ve seen over the last year or so, that could change rather quickly.

Much ado in the financial media this morning about yet another warning from the Bank for International Settlements about the current state of affairs in the global financial system as it relates to debt levels that now exceed the 2007 highs, negative interest rates, and faltering confidence in central banks who seem increasingly befuddled and desperate.

The tone appears to have been lost on whoever penned the outlier headline below.

The Bloomberg article is about as positive as the headline, so this can’t be blamed on whoever’s responsible for ensuring that headlines are click-worthy to readers.

Maybe it’s not such a bad thing to look on the bright side of things now and then, though this may not be a particularly good opportunity to do so…

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