Optimists argue that cheap oil is a good thing for consumers and commodity-sensitive businesses, while pessimists point to the hit to energy-related investment and possible spillover into the financial system.

A new note from Francisco Blanch at Bank of America Merrill Lynch, however, puts the oil move into a much bigger perspective, arguing that a sustained price plunge “will push back $3 trillion a year from oil producers to global consumers, setting the stage for one of the largest transfers of wealth in human history.”

What is the spinoff of low oil prices and the huge transfer of wealth that it entails?

Blanch and his team already see evidence that the fall in the price of crude is having a positive impact on demand, and say that it could accelerate even further if prices don’t pick up.

Meanwhile, in emerging markets, where much of the story of late has been about disappointing economic growth, Blanch still sees huge upside potential in terms of automobile penetration and consumption.

Take China for example, where the strategist sees the oil plunge helping to fuel a boom in SUV sales: “Moreover, the low oil price is encouraging Chinese consumers to buy increasingly larger cars. Sales of SUVs, the heaviest passenger vehicles category, are up 60 percent year-on-year in the last three months, while overall passenger vehicle sales are growing robustly at 22 percent.”

Money is going out of the pockets of oil companies and oil producers like Saudi Arabia and is effectively being transferred to consumers across the globe. How long will this last?

Supply and Demand

Analysts blame a slowing Chinese economy and increased U.S. crude oil production for the dramatic fall in oil prices. If the current situation and one of the largest transfers of wealth in the history of the world is to continue these factors need to continue. Forbes looks a China and crude oil prices in 2016.

Since China accounts for a large share of the global demand for oil, a slowdown in its economy is likely to result in a further decline in crude oil prices in the coming months. Additionally, the depreciation of the Chinese Yuan, and the rising debt levels in the country, have been adding to the insecurities of the investors across the globe. Hence, in this article, we aim to discuss the economic conditions prevailing in the Chinese economy and their potential impact on crude oil prices over the course of the year.

China surpassed the US to become the world’s largest net importer of petroleum and other liquids in 2013, on the back of its rising oil consumption.

Chinese government to is trying to move from an economy focused on manufacturing and exporting to a consumer driven economy. If that move is successful it will probably reduce China’s demand for imported oil and drive prices lower. If China experiences an economic hard landing its demand for oil could drop more than expected. In the meantime there are oil producers across the globe who are losing money pumping oil at current prices. To the extent that these producers fall out, prices could rise putting to an end what could otherwise be the largest transfer of wealth in the history of the world.

Is This the Largest Transfer of Wealth in the History of the World? PPT

Populism, What Is It?

Populism is a political doctrine. The short, take home point, is that in populism a person or group sides with the people against the elite. Dictators used this approach to take over Germany and Italy and bring about World War II. In India and Latin America the same doctrine brought strong men into power. The widespread result of these movements is typically the loss of political freedom and the consolidation of power in the hands of a new elite. The strongest example is Communism as seen in the world of today. Although Marx envisioned a world of fairness to the worker, witness the huge amount of wealth amassed by the Communist Party elite in China and the power and privilege of the Russian commissars before the collapse of the USSR. If one believes that free enterprise, capitalism, and democracy go hand in hand then one comes to the conclusion that populism when it gains final control falls into the hands of scoundrels and defeats its stated purpose. Will populism kill the American economy? Could be if things go too far.

Fundamental Analysis of Investments

Basic to successful investing is the ability to analyze the fundamentals. One considers the forward looking income stream of a stock, its intrinsic value. If intrinsic value is more than current value a smart long term investor buys the stocks. If the reverse is the case he sells or simply does not buy. Will populism in the person of a debt default kill the American economy? Smart investors will likely sit on the sidelines instead of risking their money in uncertain markets. If a debt default occurs the rating of US debt will fall precipitously making it much more expensive for the USA to borrow through Treasury bond sales. This will raise the cost of servicing the US debt at a time when Tea Party populists claim that their goal is to reduce the burden of US debt. The concern of many investors is that debt and growth are inversely related. The nation needs to get a handle on its spending but it needs to do so in a rational manner. Will populism kill the American economy? An old saying is that if good men do nothing evil prevails. In this case the evil may simply be pig headedness and stupidity but the result might be the same with a terrible depression worse than that of the 1930s. That would be the killing of the American economy!

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