"In a time of universal deceit telling the truth is a revolutionary act." -George Orwell

Posts Tagged ‘Financial Speculation’

Top Economists Agree: The U.S. Is In A Depression

In Uncategorized on May 8, 2012 at 2:07 pm

Oldspeak:”You know it’s grim when the prevailing debate among economists and historians is whether the world economy faces the “Great” depression of the 1930s or the “Long” depression of the 1870s.” I like to call it a “Stealth Great Depression” The bread lines have been replaced with EBT cards, and the banks are too bigger to fail, but many of the other conditions that existed in the 1930′s and 1870′s exist today. Tent cities, high unemployment, high poverty, high homelessness, wage stagnation, high debt, mass bankruptcy etc, etc, etc… A profound difference between today’s depression and those of the past is the propaganda. It’s so exquisitely and insidiously crafted that people actually believe it over what it happening all around them in the real world. Meanwhile “Institutions (banks) that know how and why to prevent things from falling apart and which nonetheless sit back and do nothing. A global collapse is being engineered. We need a radically new way forward to avert catastrophe but all we’re being offered by our political classes is tried and false ways of the past that are clearly leading to catastrophe. A ‘sustainable future’ is being monetized. More and more people awakening to the reality that those old ways are no longer acceptable. Our civilization needs a new operating system. Or a crash is not a matter of if, but when. Greed will be our downfall.

By Washington’s Blog:

Paul Krugman released a new book yesterday called “End This Depression Now“. In the introduction, Krugman writes:

The best way to think about this continued slump, I’d argue, is to accept that we’re in a depression …. It’s nonetheless essentially the same kind of situation that John Maynard Keynes described in the 1930s: “a chronic condition of subnormal activity for a considerable period without any marked tendency either towards recovery or towards complete collapse.”

Robert Shiller said yesterday that the world is in a state of “late Great Depression”.

Many other top economists also say that were in a Depression.

We are stuck in a depression because the government has done all of the wrong things, and has failed to address the core problems.

For example:

  • The government is doing everything else wrong. See this and this

This isn’t an issue of left versus right … it’s corruption and bad policies which help the top .1% but are causing a depression for the vast majority of the American people.

How The Goldman Vampire Squid Just Captured Europe

In Uncategorized on April 19, 2012 at 2:15 pm

Oldspeak:The Goldman Sachs coup that failed in America has nearly succeeded in Europe – a permanent, irrevocable, unchallengeable bailout for the banks underwritten by the taxpayers. Goldman Sachs and the financial technocrats have taken over the European ship. Democracy has gone out the window, all in the name of keeping the central bank independent from the “abuses” of government. Yet, the government is the people – or it should be. A democratically elected government represents the people. Europeans are being hoodwinked into relinquishing their cherished democracy to a rogue band of financial pirates, and the rest of the world is not far behind.”-Ellen Brown Banks get bailouts while the very governments that issue the bailouts fail because they don’t actually have to money to pay for the bailout. They just run their printing presses and hand over increasingly worthless fiat currency. If you don’t know what quantitative easing, you will soon. Meanwhile, poverty, food, & energy costs grow, while 400 white men get incalculably rich.

Related Story:

Goldman Sachs, Citibank, JP Morgan Chase, Bank Of America Have Assets of $5 trillion & Carry $235 TRILLION In Risk Exposure, 1/3 Of World Total

BBC Speechless As Trader Tells The Truth: “Governments Don’t Rule The World, Goldman Sachs Rules The World.”

Why Isn’t Wall Street In Jail?

By Ellen Brown @ Truthout:

he Goldman Sachs coup that failed in America has nearly succeeded in Europe – a permanent, irrevocable, unchallengeable bailout for the banks underwritten by the taxpayers.

In September 2008, Henry Paulson, former CEO of Goldman Sachs, managed to extort a $700 billion bank bailout from Congress. But to pull it off, he had to fall on his knees and threaten the collapse of the entire global financial system and the imposition of martial law; and the bailout was a one-time affair. Paulson’s plea for a permanent bailout fund – the Troubled Asset Relief Program or TARP – was opposed by Congress and ultimately rejected.

By December 2011, European Central Bank President Mario Draghi, former vice president of Goldman Sachs Europe, was able to approve a 500 billion euro bailout for European banks without asking anyone’s permission. And in January 2012, a permanent rescue funding program called the European Stability Mechanism (ESM) was passed in the dead of night with barely even a mention in the press. The ESM imposes an open-ended debt on EU member governments, putting taxpayers on the hook for whatever the ESM’s eurocrat overseers demand.

The bankers’ coup has triumphed in Europe seemingly without a fight. The ESM is cheered by euro zone governments, their creditors and “the market” alike, because it means investors will keep buying sovereign debt. All is sacrificed to the demands of the creditors, because where else can the money be had to float the crippling debts of the euro zone governments?

There is another alternative to debt slavery to the banks. But first, a closer look at the nefarious underbelly of the ESM and Goldman’s silent takeover of the ECB….

The Dark Side of the ESM

The ESM is a permanent rescue facility slated to replace the temporary European Financial Stability Facility and European Financial Stabilization Mechanism as soon as member states representing 90 percent of the capital commitments have ratified it, something that is expected to happen in July 2012. A December 2011 YouTube video titled “The shocking truth of the pending EU collapse!” originally posted in German, gives such a revealing look at the ESM that it is worth quoting here at length. It states:

The EU is planning a new treaty called the European Stability Mechanism, or ESM: a treaty of debt…. The authorized capital stock shall be 700 billion euros. Question: why 700 billion?… [Probable answer: it simply mimicked the $700 billion the US Congress bought into in 2008.][Article 9]: “,,, ESM Members hereby irrevocably and unconditionally undertake to pay on demand any capital call made on them … within seven days of receipt of such demand.” … If the ESM needs money, we have seven days to pay…. But what does “irrevocably and unconditionally” mean? What if we have a new parliament, one that does not want to transfer money to the ESM?…

[Article 10]: “The Board of Governors may decide to change the authorized capital and amend Article 8 … accordingly.” Question: … 700 billion is just the beginning? The ESM can stock up the fund as much as it wants to, any time it wants to? And we would then be required under Article 9 to irrevocably and unconditionally pay up?

[Article 27, lines 2-3]: “The ESM, its property, funding and assets … shall enjoy immunity from every form of judicial process…. ” Question: So the ESM program can sue us, but we can’t challenge it in court?

[Article 27, line 4]: “The property, funding and assets of the ESM shall … be immune from search, requisition, confiscation, expropriation, or any other form of seizure, taking or foreclosure by executive, judicial, administrative or legislative action.” Question: … [T]his means that neither our governments, nor our legislatures, nor any of our democratic laws have any effect on the ESM organization? That’s a pretty powerful treaty!

[Article 30]: “Governors, alternate Governors, Directors, alternate Directors, the Managing Director and staff members shall be immune from legal process with respect to acts performed by them … and shall enjoy inviolability in respect of their official papers and documents.” Question: So anyone involved in the ESM is off the hook? They can’t be held accountable for anything? … The treaty establishes a new intergovernmental organization to which we are required to transfer unlimited assets within seven days if it so requests, an organization that can sue us but is immune from all forms of prosecution and whose managers enjoy the same immunity. There are no independent reviewers and no existing laws apply? Governments cannot take action against it? Europe’s national budgets in the hands of one single unelected intergovernmental organization? Is that the future of Europe? Is that the new EU – a Europe devoid of sovereign democracies?

The Goldman Squid Captures the ECB

Last November, without fanfare and barely noticed in the press, former Goldman executive Mario Draghi replaced Jean-Claude Trichet as head of the ECB. Draghi wasted no time doing for the banks what the ECB has refused to do for its member governments – lavish money on them at very cheap rates. French blogger Simon Thorpe reports:

On the 21st of December, the ECB “lent” 489 billion euros to European Banks at the extremely generous rate of just 1% over 3 years. I say “lent,” but in reality, they just ran the printing presses. The ECB doesn’t have the money to lend. It’s Quantitative Easing again.The money was gobbled up virtually instantaneously by a total of 523 banks. It’s complete madness. The ECB hopes that the banks will do something useful with it – like lending the money to the Greeks, who are currently paying 18% to the bond markets to get money. But there are absolutely no strings attached. If the banks decide to pay bonuses with the money, that’s fine. Or they might just shift all the money to tax havens.

At 18 percent interest, debt doublesin just four years. It is this onerous interest burden – not the debt itself – that is crippling Greece and other debtor nations. Thorpe proposes the obvious solution:

Why not lend the money to the Greek government directly? Or to the Portuguese government, currently having to borrow money at 11.9%? Or the Hungarian government, currently paying 8.53%. Or the Irish government, currently paying 8.51%? Or the Italian government, who are having to pay 7.06%?

The stock objection to that alternative is that Article 123 of the Lisbon Treaty prevents the ECB from lending to governments. But Thorpe reasons:

My understanding is that Article 123 is there to prevent elected governments from abusing Central Banks by ordering them to print money to finance excessive spending. That, we are told, is why the ECB has to be independent from governments. OK. But what we have now is a million times worse. The ECB is now completely in the hands of the banking sector. “We want half a billion of really cheap money!!” they say. OK, no problem. Mario is here to fix that. And no need to consult anyone. By the time the ECB makes the announcement, the money has already disappeared.

At least if the ECB was working under the supervision of elected governments, we would have some influence when we elect those governments. But the bunch that now has their grubby hands on the instruments of power are now totally out of control.

Goldman Sachs and the financial technocrats have taken over the European ship. Democracy has gone out the window, all in the name of keeping the central bank independent from the “abuses” of government. Yet, the government is the people – or it should be. A democratically elected government represents the people. Europeans are being hoodwinked into relinquishing their cherished democracy to a rogue band of financial pirates, and the rest of the world is not far behind.

Rather than ratifying the draconian ESM treaty, Europeans would be better advised to reverse Article 123 of the Lisbon treaty. Then, the ECB could issue credit directly to its member governments. Alternatively, euro zone governments could re-establish their economic sovereignty by reviving their publicly owned central banks and using them to issue the credit of the nation for the benefit of the nation, effectively interest free. This is not a new idea, but has been used historically to very good effect, e.g. in Australia through the Commonwealth Bank of Australia and in Canada through the Bank of Canada.

Today, the issuance of money and credit has become the private right of vampire rentiers, who are using it to squeeze the lifeblood out of economies. This right needs to be returned to sovereign governments. Credit should be a public utility, dispensed and managed for the benefit of the people.

To add your signature to a letter to parliamentarians blocking ratification of the ESM, click here.

Finance Experts: Speculators At Wall Street ‘Casinos’ Continue To Manipulate Prices At The Pump

In Uncategorized on April 5, 2012 at 12:25 pm

Gas Pump PriceOldspeak: “No, high gas prices have NOTHING to do with President Obama. The debate in Washington over cutting oil subsidies is another manufactured issue, diverting attention from the true cause of rising oil and commodities prices; unregulated, unchecked financial speculation and derivatives trading. Coincidentally the cause of the recent crash of the global economic system. Recently passed “financial reform” did nothing to reform this fatally flawed financial system. A simple and totally correctable (stricter regulation) flaw; corporate media, corporate economists,  no one is talking about it. “no one wants to talk about, because so many powerful people armed with legions of lawyers want unquestioning allegiance, and will sue you into silence.”- Danny Schechter. The other Ginormous elephant in the room. We’re running out of oil. Tar sands, offshore drilling
its all an indication that the easy to get to oil is gone. The oil we’re consuming now is infinitely harder to process and produce. Speculators are doing what they do best: profiting handsomely from scarcity. Disaster capitalists are having a field day as the people suffer. This is what oligarchy looks like.

Related Stories:

Finance Expert Says Speculators Are Behind High Oil and Gasoline Prices

Unchecked Financial Speculation Drives Oil Price Hikes; Is There A Scam Behind The Rise In Oil And Food Prices?

By Anna Staver @ The Huffington Post: 

Americans are paying for $4-a-gallon gasoline because Wall Street “casinos” have blocked regulators from cracking down on rampant oil speculation, finance experts argued on Capitol Hill Wednesday.

In an effort to counter Republican claims that gas prices are high because the Obama administration does not allow enough drilling, House Democratic leaders staged a hearing featuring former Reagan and Clinton administration oil and trading analysts who blame the surge on speculation.

And the vast profits from that speculation do not go into developing more oil or creating jobs, the analysts argued.

“Your constituents should know that every time they break their heart by buying $4 and maybe soon $5 gasoline, that money isn’t going into production,” said University of Maryland professor Michael Greenberger, who served as director of the division of trading and markets for the Commodity Futures Trading Commission in the Clinton administration. “It’s going into homebuilding in the Hamptons and yacht building.”

And the big finance firms are working overtime to ensure that the speculative commodity keeps flowing, he said.

“They’ve got hundreds of millions of dollars that they are using in lobbying on the Hill” or the Commodity Futures Trading Commission, Greenberger told HuffPost after the session. “Now they are bringing all these lawsuits; they are stopping the action that has already been asked for by Congress to stop the speculation.”

He was referring to suits that seek to limit certain Dodd-Frank financial reforms that, among other things, grant the commission the power to crack down on excessive oil speculation.

Greenberger told the Democratic Steering and Policy Committee that curtailing the speculation — some of which he said was necessary — would cost nothing and would not stop any markets from functioning.

“What are you stopping here? Are you stopping money from going into production? Are you stopping money from [reaching] people creating jobs?” Greenberger asked. “Unless you think casinos — which come to us with names like Goldman Sachs and Morgan Stanley — are job creators, you’re stopping betting. If we’re wrong about this — if everything we’re telling you is incorrect — what will you have done except close a couple of casinos?”

Rep. Xavier Becerra (D-Calif.) pressed Greenberger if there was contradictory evidence when it comes to figuring out whether high gas prices could be cured through increased drilling and domestic oil production.

Greenberger conceded that one or two experts in the country would hold that opinion but said the vast majority in his field believe that Wall Street sets the price of oil.

“Many would like you to believe that this is a supply-demand problem. It’s not,” Greenberger said. “It is excessive speculation, which is a fancy way of saying that gamblers wearing Wall Street suits have taken over and created investment vehicles designed to drive the price of oil up.”

He cited testimony by Goldman Sachs earlier this year asserting that speculation drives up the cost of a barrel of oil by as much as $23.39.

Gene Guildford, a former president of the Maine Oil Dealers Association and a Reagan administration Commerce Department official, estimated that speculation translates into roughly a dollar added to the price of each gallon of gasoline bought by the U.S. consumer. “Instead of spending four dollars, you should have been spending something closer to three dollars for your gallon of gasoline,” he said.

The extra cost to America’s drivers is staggering, Guildford said. “At 11 billion gallons a month that Americans consume, Americans today are paying $10 billion more a month for gasoline today than they did in December.”

Both men urged the committee to fully fund the Commodity Futures Trading Commission and propose legislation in the House aimed at cutting oil speculation to what is required to keep the markets liquid.

Otherwise, it’s just making millionaires richer and middle-class Americans poorer, they and Democrats argued.

“Wall Street speculators are artificially driving up the price at the pump and causing pain to millions of American consumers,” said House Minority Leader Nancy Pelosi (D-Calif.).

IMF Advisor: Global Financial Meltdown in 2 – 3 Weeks Without Bank “Recapitalizaton”; Sovereign Debt “Stabilization”

In Uncategorized on October 10, 2011 at 1:28 pm

Oldspeak:”A little over a week after their explosive interview with trader Alessio Rastani predicting global economic collapse, BBC interviewed IMF advisor Dr. Robert Shapiro. The bailout expert said “If they can not address [the financial crisis] in a credible way, I believe within perhaps 2 to 3 weeks we will have a meltdown in sovereign debt which will produce a meltdown across the European banking system…All those banks are counterparties to every significant bank in the United States, and in Britain, and in Japan, and around the world. This would be a crisis that would be in my view more serious than the crisis in 2008″ - UNLESS the International Banking Cartels are “recapitalized” with hundreds of billions of Euros. Sounds eerily similar to what was said in the lead up and during the last great crash of the global financial system in 08. Only this time there’s even less money for bailouts. I’m sure they’ll get it anyway. All these gloom and doom predictions belie the basic fundamental problem, that no one wants to address. The monetary system is failing, and will keep failing if people insist on making changes around the edges. You can’t have made miniscule changes to regulations to reign in the casino capitalism and expect different results. You can’t keep throwing fiat money at the problem. This economic system is about the furthest thing from true ‘economy’, (thrifty and efficient use of material resources : frugality in expenditures; also : an instance or a means of economizing : saving) there is. It’s driven by a base & immoral concept: Greed. We would do well to implement an economy like that articulated by Dr. Manfred Max-Neef:based in five postulates and one fundamental value principle. 

One, the economy is to serve the people and not the people to serve the economy. 

Two, development is about people and not about objects. 

Three, growth is not the same as development, and development does not necessarily require growth. 

Four, no economy is possible in the absence of ecosystem services. 

Five, the economy is a subsystem of a larger finite system, the biosphere, hence permanent growth is impossible. 

And the fundamental value to sustain a new economy should be that no economic interest, under no circumstance, can be above the reverence of life.”

If we forgave all debt, reset to zero, retired greed as the dominant value in the world, re-worked the global economy to adhere to these postulates and values, we could focus on collectively preserving and distributing the earth’s finite resources in an equitable way. We’d all be a lot better off.

Related Video:

IMF Adviser Says We Face A Worldwide Banking Meltdown

By Tyler Durden @ Zero Hedge:

In an interview with IMF advisor Robert Shapiro, the bailout expert has pretty much said what, once again, is on everyone’s mind: “If they can not address [the financial crisis] in a credible way I believe within perhaps 2 to 3 weeks we will have a meltdown in sovereign debt which will produce a meltdown across the European banking system. We are not just talking about a relatively small Belgian bank, we are talking about the largest banks in the world, the largest banks in Germany, the largest banks in France, that will spread to the United Kingdom, it will spread everywhere because the global financial system is so interconnected. All those banks are counterparties to every significant bank in the United States, and in Britain, and in Japan, and around the world. This would be a crisis that would be in my view more serrious than the crisis in 2008…. What we don’t know the state of credit default swaps held by banks against sovereign debt and against European banks, nor do we know the state of CDS held by British banks, nor are we certain of how certain the exposure of British banks is to the Ireland sovereign debt problems.”

But no, Morgan Stanley does, or so they swear an unlimited number of times each day. And they say not to worry about anything because, you see, it is not like they have any upside in telling anyone the truth. Which is why for everyone hung up on the latest rumor of a plan about a plan about a plan spread by a newspaper whose very viability is tied in with that of the banks that pay for its advertising revenue, we have one thing to ask: “show us the actual plan please.” Because it is easy to say “recapitalize” this, and “bad bank” that. In practice, it is next to impossible. So yes, ladies and gentlemen, enjoy this brief relief rally driven by the fact that China is offline for the week and that the persistent source of overnight selling on Chinese “hard/crash landing” concerns has been gone simply due to an extended national holiday. Well, that holiday is coming to an end.

Horn Of Africa Famine: Millions At Risk In Deadly Cocktail Of War, Climate Change, Neoliberalism

In Uncategorized on July 24, 2011 at 5:55 pm

Two-year-old Aden Salaad looks up toward his mother as she bathes him in a tub at a Doctors Without Borders hospital, where Aden is receiving treatment for malnutrition, in Dagahaley Camp, outside Dadaab, Kenya Picture: AP/Rebecca Blackwell

Oldspeak:”Militarism, globalization, resource extraction/exploitation, rampant unregulated financial speculation on food, historical & current pollution by the global north, support for ruthless dictators who serve foreign interests instead of native ones, obstructionist stances to climate and environmental policies that will help the global south adapt technologically and socially to climate change though not necessarily benefit financially the global north have spawned the epic disaster we see unfolding in the Motherland. And the disaster capitalist in agribusiness are licking their chops. This tragedy provides them with the perfect opportunity to foist their genetically modified frankenfood on weakened and desperate people, ostensibly benevolent, offering its seeds for ‘free’. At the same time legally absolving themselves of all liability for their products’ less desirable effects. The same script was drawn up in Haiti after their most recent disaster, but they rejected it, choosing instead to retain what little sovereignty they have left over their food supply. Hopefully North African farmers will do the same by echoing this sentiment: “We reject Monsanto and their GMOs. GMOs would be the extermination of our people.” -Doudou Pierre, national coordinating committee member of the National Haitian Network for Food Sovereignty and Food Security (RENHASSA),

By Amy Goodman and Juan Gonzalez @ Democracy Now:

Guests:

Kiki Gbeho, country head in Somalia for the U.N. Office for the Coordination of Humanitarian Affairs. She is based in Nairobi and returned from Somalia last week.
Christian Parenti, is contributing editor at The Nation magazine and an award-winning author of several books, most recently Tropic of Chaos: Climate Change and the New Geography of Violence. He visited the Horn of Africa for research on the book.

JUAN GONZALEZ: The United Nations has called an emergency meeting to discuss the Horn of Africa drought, which it says has already claimed tens of thousands of lives. Famine was declared in two regions of Somalia on Wednesday, where 3.7 million people are in need of urgent humanitarian assistance. Another eight million people need food assistance in neighboring countries, including Kenya and Ethiopia.

U.N. Secretary-General Ban Ki-moon calls the situation a “catastrophic combination of conflict, high food prices and drought” and has appealed for immediate aid. Writing in the Los Angeles Times today, he said, quote, “To save the lives of the people at risk—the vast majority of them women and children—we need about $1.6 billion in aid. So far, international donors have given only half that amount. To turn the tide, to offer hope in the name of our common humanity, we must mobilize worldwide.”

The World Food Programme’s director spoke about the conditions in southern Somalia and also called for urgent assistance.

JOSETTE SHEERAN: I’ve met here today people from all over southern Somalia. And there’s no food where they are. And what we’ve heard from them—I just heard from one woman who’s lost three of her children. And so, we’re calling on the world to really back operations to scale up very quickly to reach those in the epicenter, in the famine conditions in southern Somalia. It’s very dangerous and risky, but we have to reach people. They’re not making it all the way here to Mogadishu. These are the ones lucky enough to make it here. And even these feeding centers are overrun.

JUAN GONZALEZ: That’s World Food Programme director Josette Sheeran.

Meanwhile, the U.N. says that pastoralist communities in Kenya and Somalia have also lost millions of their livestock. Carcasses lie all over Kenya’s North Eastern Province as the worst drought in decades continues to ravage the region.

MOHAMED HADJI: [translated] To say the truth, for the past six to seven years, we have not had any rain here. The population was around 6,000 to 7,000. But since the drought became serious, the population has drastically reduced, and it is just a few of us remaining. The others have left and have gone to look for water in pastures elsewhere.

AMY GOODMAN: To discuss the situation in the Horn of Africa, we’re joined on the phone from Nairobi by Kiki Gbeho, the country head for Somalia of the U.N.’s Office for the Coordination of Humanitarian Affairs. She has just returned from Somalia.

We’re also joined in our New York studio by Christian Parenti, author of Tropic of Chaos: Climate Change and the New Geography of Violence. He visited the Horn of Africa as he researched his book.

Kiki, let’s go to you first in Nairobi. Explain the scope of the problem.

Kiki Gbeho—

KIKI GBEHO: [inaudible] recently in Somalia in two locations—Mogadishu, the capital, and a location called Dolo. In both places, we met people who had walked for weeks in search of food. Some people say that they buried children along the way. And what was most disturbing about what I saw and what I heard was that the people I met said they were the better off. They had a limited amount of resources left, and so were able to move. They said they fear for those who they had left behind. The situation is dire.

AMY GOODMAN: What do you feel needs to be done?

KIKI GBEHO: Well, we need to scale up to respond to the need immediately. At the moment, even though we have received some funding from donors, it is insufficient to meet the needs. When famine was announced on Wednesday, we said we needed $300 million in the next two months to scale up response. So, one of the key issues for us right now is resources to be able to respond.

JUAN GONZALEZ: And why do you think that Somalia has been so particularly hard hit in the Horn of Africa?

KIKI GBEHO: Well, it’s a deadly cocktail. We have the ongoing conflict. We’ve had several consecutive seasons of drought. And then we’ve had severe price hikes. Prices have risen in the last year by almost 300 percent. So, even though there is some food available on the market, it is simply out of the reach of the common person on the ground. So when you mix these factors together, you get what we have in Somalia at the moment. We have been talking about this since last year, so we can’t say that we are surprised. But we need to do—we need to take urgent action now, because tens of thousands of people have already died, but it is possible to save lives if we act now.

AMY GOODMAN: How did it get to this point, Kiki Gbeho? The warnings had been coming out for quite some time.

KIKI GBEHO: As I said, I think it is a deadly cocktail. It’s an ongoing conflict. We have challenges with access, so we don’t have, as you would see in other aid operations, large numbers of international agencies working on the ground. And then the global crisis, we see price hikes all over the world. The whole Horn is affected by the drought. And you end up where we are now.

I think that the good news in all of this is that we still do have the possibility to save lives. When we talk to the technical people on the ground who assess for us, they tell us, if we act now, if we take advantage of the upcoming raining seasons and plant, if we manage to get food into the country, if we manage to put cash in the hands of people, and if we manage to scale up our health interventions, we could prevent the situation from deteriorating further. At the moment, only two regions have been declared as being in drought, but if we don’t do something, we can see the remainder of the regions in the south quickly roll into the same situation.

JUAN GONZALEZ: Now, Christian Parenti, you’ve been to the Horn of Africa, and in your recent book you dealt with the effects of climate change and the situation that’s occurring in countries like Somalia. Talk about your sense of what’s happening.

CHRISTIAN PARENTI: Well, yeah, this was predicted long ago by people on the ground. We could see it coming. And the other guest is correct: it’s a combination of war, climate change and very bad policy, particularly an embrace of free market—radical free market policies by regional governments that mean the withdrawal of support for pastoralists, the type of people you saw with their dead cattle. There are no programs from the government of Kenya, for example, to help them drill new wells, to help them with veterinary services for their ill animals, to help introduce new forms of livestock such as camels.

And then, on a broader international stage, there’s the tolerance for really rank speculation by firms like Glencore and Cargill, which have a lot to answer for in terms of this famine. One of the key events that has driven up food prices was climate change last year—worst drought in a hundred years in the Black Sea region of Russia, major flooding in U.S. and Canada. That helped drive up grain prices by almost 100 percent. But it wasn’t just that, because Russia then imposed an export ban. Glencore actually publicly lobbied for Russia to ban exports, much of which went to the World Food Programme. For example, 95 percent of the World Food Programme’s wheat comes from these Russian contracts. So, these speculators, Glencore, encouraged the Russians to impose this ban. They do that. Prices go up. Glencore then has a $60 billion IPO. So there are these—even far from the field, there are these factors that help exacerbate this emergency situation.

Then there’s the deeper structural thing of undermining state capacity and also military support, historically and presently, for wars that have helped produce failed states like Somalia. I mean, Somalia failed in part because the U.S. supported it in a decade-long war against Ethiopia, which led to its collapse.

AMY GOODMAN: We just read in headlines, Kiki Gbeho, about the al-Shabab announcing that the ban on foreign aid groups remains in effect in their area. How does that affect the United Nations and all of the aid groups coming in?

KIKI GBEHO: Well, aid agencies have worked throughout. We say the situation is difficult, but not impossible. How they operate is they work with local communities, district by district. And in dialogue with these communities, they agree on targeting communities and providing assistance. Our only interest in Somalia at this moment is to save lives, nothing else. We welcome the previous statement by al-Shabab, welcoming humanitarian agencies to resume operations in areas under their control. And I think we will continue to reiterate that the need is to increase assistance to populations in acute distress. Our only interest in Somalia at this moment is to save lives, nothing else.

JUAN GONZALEZ: And Kiki, what about this issue, as you mentioned, the 300 percent increase in food prices, and Christian was mentioning? Has there been any approach made to the suppliers of these grains about bringing their prices down, especially in these countries that are so hard hit?

KIKI GBEHO: Well, I think that it’s difficult. Partly, the previous speaker mentioned the fact that there is a failed state in Somalia. We do not have a government that controls the whole country and can therefore regulate. We believe that if we were able to get food into the country, and if we were able to put cash in the hands of individuals, it could work with—we could influence the market. But the price—the high prices are not something that’s seen only in Somalia. I believe it’s in the the whole Horn. And in fact, it is global. There are global factors at play here.

AMY GOODMAN: I wanted to bring in what happened this week at the U.N. Security Council, discussing the effect of climate change on peace and security. Security Council members debated whether the most powerful U.N. body should address climate change as a security matter. Speaking at the meeting, U.S. ambassador to the U.N., Susan Rice, insisted it should.

SUSAN RICE: We have dozens of countries in this body and in this very room whose very existence is threatened. They have asked this Council to demonstrate our understanding that their security is profoundly threatened. Instead, because of the refusal of a few to accept our responsibility, this Council is saying, by its silence, in effect, tough luck. This is more than disappointing. It’s pathetic, it’s short-sighted, and frankly, it’s a dereliction of duty.

AMY GOODMAN: Christian Parenti, is this a shift in policy for the U.S.? What’s the significance of what Susan Rice said at the U.N. Security Council? We don’t usually think of the United States taking proactive stances on climate change. They were quite obstructionist, for example, at the Copenhagen climate change conference.

CHRISTIAN PARENTI: It’s not really a shift. I mean, it’s tricky when you first look at it. But really what’s going on is the Security Council, dominated by the U.S., France, and the U.K., with Russia and China as other permanent members, and then rotating members, is essentially making a move to impose itself and sort of, some would say, hijack the discussion around climate change within the U.N. process. Now remember, there’s also another U.N. process in which the U.S. is not demanding that there be action, but is stalling, and that is theUNFCCC negotiations for a successor agreement to Kyoto, and the U.S. has played a very destructive role in that.

And so, many countries in the General Assembly were saying, “Hey, you know, we’re already dealing with climate change. Yes, it is a security problem, but that doesn’t mean it should have a primarily military response, because that doesn’t work, ultimately. In the short term, maybe it works; in the long term, it leads to failed states. What we need is to deal with creating an international fund, which is part of these negotiations, which can transfer capital and technology to the Global South. It needs to be done within the context of the General Assembly.” And there are these ongoing negotiations that the U.S. has essentially almost sabotaged. And now the U.S. wants to appear proactive and use the discourse and methods that it dominates, which are military methods and control this through the Security Council.

JUAN GONZALEZ: And is that why Russia and China sought to block this effort? Or were there other reasons—

CHRISTIAN PARENTI: Yes.

JUAN GONZALEZ: —some of the stuff you were mentioning about Russia before in terms of food supply?

CHRISTIAN PARENTI: Yeah, yes and no. I think that there’s an element of those two countries, as emerging economies, wanting to push back against the OECD countries on the Security Council, but then there’s also the fact that, I mean, the Security Council is made up of historical polluters and current polluters. I mean, Russia is a major oil exporter. China is a major consumer of fossil fuels. So I think there were those issues, as well, that they’re hesitant to be brought to account on those issues.

AMY GOODMAN: And then you have the Republican-led House Foreign Affairs Committee that voted yesterday to ban funding in next year’s budget for Obama’s initiative to support poor nations in adapting to climate change or pursuing clean energy. That doesn’t mean it has passed through the Senate, but it was voted.

CHRISTIAN PARENTI: Yeah, and that’s one of—that’s a sort of domestic analog to one of the key issues in these international debates, which is setting up $100 million—or $100 billion fund to help with adaptation and mitigation in the Global South. So, I mean, in the Horn of Africa, there is no state capacity, there is no money, for helping people to adapt to this extreme climate—i.e. bringing in new livestock, developing water-harvesting techniques, because it does rain in the Horn of Africa, but it usually comes down, due to climate change these days, as sudden deluges. So there needs to be technological and social adaptation to that.

This fund that will be part of the successor agreement to Kyoto is essential in that, and so the Republicans are signaling that they won’t have anything of it. And we should recall that, of course, the preceding agreement, the Kyoto Protocol, was signed by Clinton but not ratified by the Senate, so it never became force of law here in the U.S. And it had, as a result, very minimal impact internationally in terms of reducing carbon emissions.

AMY GOODMAN: Money that goes into the military versus into this kind of aid?

CHRISTIAN PARENTI: At first, it looks very proactive and necessary. There’s all this instability. But if you look historically at the role of U.S. military aid, it undermines stability. I mean, look at the U.S. role in Somalia. It supported Siad Barre until he collapsed, and there hasn’t been a military state—

AMY GOODMAN: The long-reigning dictator there.

CHRISTIAN PARENTI: Yeah, who started a war in ’77 against Ethiopia. Look at Pakistan—not the same region, but one of the most water-stressed countries in the country, just suffered a major drought. The U.S. has poured $20 billion in military aid into that country. It becomes less and less stable every year, and I would argue, as a result of flooding it with cheap weapons, developing these asymmetrical assets, and, you know, neglecting land reform and social justice. And that’s a country that is prime for, you know, relative state failure, state failure in some parts.

AMY GOODMAN: Christian Parenti, we want to thank you for being with us, contributing editor at Nation magazine, author of a number of books, including his most recent, just out, Tropic of Chaos: Climate Change and the New Geography of Violence_. His violence”>first chapter is on our website at democracynow.org. And thanks so much to our guest in Nairobi, to Kiki Gbeho, head of the Somalia Office of U.N. Coordination of Humanitarian Affairs. Thanks so much for being with us.

U.S. Federal Reserve Audit Reveals $16 TRILLION In Secret Loans To Bailout U.S. And Foreign Bankers

In Uncategorized on July 22, 2011 at 4:31 pm

Oldspeak:” Hmm.  Maybe this is why there’s no money for paying teachers, cops, nurses, sanitation, and government workers. Maybe this is why the U.S. Government is on the verge of default. Maybe this is why we’re pretending not to notice more and more homeless people. Tens of trillions of U.S. dollars have gone to bankers. An audit of the Fed reveals why the establishment resisted an audit for so long.  In “a clear case of socialism for the rich and rugged, you’re-on-your-own individualism for everyone else “, the audit revealed widespread corruption, collusion, conflicts of interest, double dealing and profiteering among the individuals who facilitated this monumental transfer of wealth to the people responsible for crashing the global economic system with their reckless, unregulated speculative gambling with people’s savings, homes, jobs, food, health, and well being. Why is there money to bailout banks in South Korea and Scotland, but none for Main Street, the working poor, and homeless? The rich have the best government money can buy, that’s why. Socialism is here America! It’s just that’s it’s not for you. Just the unfathomably wealthy.”

By Newsroom @ Sen. Bernie Sanders

The first top-to-bottom audit of the Federal Reserve uncovered eye-popping new details about how the U.S. provided a whopping $16 trillion in secret loans to bail out American and foreign banks and businesses during the worst economic crisis since the Great Depression. An amendment by Sen. Bernie Sanders to the Wall Street reform law passed one year ago this week directed the Government Accountability Office to conduct the study. “As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world,” said Sanders. “This is a clear case of socialism for the rich and rugged, you’re-on-your-own individualism for everyone else.”

Among the investigation’s key findings is that the Fed unilaterally provided trillions of dollars in financial assistance to foreign banks and corporations from South Korea to Scotland, according to the GAO report. “No agency of the United States government should be allowed to bailout a foreign bank or corporation without the direct approval of Congress and the president,” Sanders said.

The non-partisan, investigative arm of Congress also determined that the Fed lacks a comprehensive system to deal with conflicts of interest, despite the serious potential for abuse.  In fact, according to the report, the Fed provided conflict of interest waivers to employees and private contractors so they could keep investments in the same financial institutions and corporations that were given emergency loans.

For example, the CEO of JP Morgan Chase served on the New York Fed’s board of directors at the same time that his bank received more than $390 billion in financial assistance from the Fed.  Moreover, JP Morgan Chase served as one of the clearing banks for the Fed’s emergency lending programs.

In another disturbing finding, the GAO said that on Sept. 19, 2008, William Dudley, who is now the New York Fed president, was granted a waiver to let him keep investments in AIG and General Electric at the same time AIG and GE were given bailout funds.  One reason the Fed did not make Dudley sell his holdings, according to the audit, was that it might have created the appearance of a conflict of interest.

To Sanders, the conclusion is simple. “No one who works for a firm receiving direct financial assistance from the Fed should be allowed to sit on the Fed’s board of directors or be employed by the Fed,” he said.

The investigation also revealed that the Fed outsourced most of its emergency lending programs to private contractors, many of which also were recipients of extremely low-interest and then-secret loans.

The Fed outsourced virtually all of the operations of their emergency lending programs to private contractors like JP Morgan Chase, Morgan Stanley, and Wells Fargo.  The same firms also received trillions of dollars in Fed loans at near-zero interest rates. Altogether some two-thirds of the contracts that the Fed awarded to manage its emergency lending programs were no-bid contracts. Morgan Stanley was given the largest no-bid contract worth $108.4 million to help manage the Fed bailout of AIG.

A more detailed GAO investigation into potential conflicts of interest at the Fed is due on Oct. 18, but Sanders said one thing already is abundantly clear. “The Federal Reserve must be reformed to serve the needs of working families, not just CEOs on Wall Street.”

To read the GAO report, click here

“They’re Going To Try To Panic The Population Into Acquiescing In A Democratic Party Sellout By Cutting Back Payments To The People, While Making Sure They Pay The Pentagon, Foreign Aid, And Wall Street”

In Uncategorized on July 16, 2011 at 2:19 pm

Bought and Paid For: Laughing all the way to the Bankers.

 

Oldspeak:”Only a crisis, real or perceived produces real change” -Milton Friedman.The rancorous debate over the debt belies a fundamental truth of our economy — that it is run for the few at the expense of the many, that our entire government has been turned into a machine which takes the wealth of a mass of Americans and accelerates it into the hands of the few.” -Dennis Kusinnich. What you are seeing is textbook disaster capitalism, which is the practice (by a government, regime etc) of taking advantage of a major disaster to adopt neo-liberal economic policies that the population would be less likely to accept under normal circumstances. We’ve seen this movie most recently after 9/11, when the country was gripped with fear of terrorism, the Bush Administration and U.S. Congress passed the U.S.A. Patriot Act, depriving Americans of their rights not to be spied on, searched and seized or  indefinitely detained without charge, and created the Department Of Homeland Security, which has morphed into a gargantuan surveillance and ‘security’ apparatus. Now they’re using fear of financial catastrophe ram through draconian cuts to social programs. All while continuing to enrich the wealthy, finance client states, and the military-industrial complex on the backs of the other 99% If anything, these budget talks make it clear to anyone paying attention, who U.S. Politicians’ most important constituents are, and they sure ain’t the American people. Sadly in Washington money talks, and Change You Can Believe In walks.

Debt Ceiling Charade A Move To The Right

By Washington’s Blog:
pointed out last year that Ronald Reagan’s budget director said that the tax cuts for the wealthy were “the biggest fiscal mistake in history”.

noted yesterday:

Plugging the major holes in our economy is more important than either cutting spending or raising taxes.

And stopping bailouts and giveaways for the top .1% of the richest elite (which weaken rather than strengthen the economy, as shown herehere and here) and slashing spending on unnecessary imperial wars (which reduce rather than increase our national security, as demonstrated here and here) is what the budgetreally needs.

As I wrote last year:

Why aren’t our government “leaders” talking about slashing the military-industrial complex, which is ruining our economy with unnecessary imperial adventures?

And why aren’t any of our leaders talking about stopping the permanent bailouts for the financial giants who got us into this mess? And see this.

And why aren’t they taking away the power to create credit from the private banking giants – which is costing our economy trillions of dollars (and is leading to a decrease in loans to the little guy) – and give it back to the states?

If we did these things, we wouldn’t have to raise taxes or cut core services to the American people.

pointed out the next month:

If there’s any shortfall, all we have to do is claw back the ill-gotten gains from the fraudsters working for the too big to fails whose unlawful actions got us into this mess in the first place. See thisthisthisthis and this.

Dennis Kucinich wrote in a post entitled “Debt Political Theater Diverts Attention While Americans’ Wealth is Stolen”:

The rancorous debate over the debt belies a fundamental truth of our economy — that it is run for the few at the expense of the many, that our entire government has been turned into a machine which takes the wealth of a mass of Americans and accelerates it into the hands of the few.

***

We have to realize what this country’s economy has become. Our monetary policy, through the Federal Reserve Act of 1913, privatized the money supply, gathers the wealth, puts it in the hands of the few while the Federal Reserve can create money out of nothing, give it to banks to park at the Fed while our small businesses are starving for capital.

Mark my words — Wall Street cashes in whether we have a default or not. And the same type of thinking that created billions in bailouts for Wall Street and more than $1 trillion in giveaways by the Federal Reserve today leaves 26 million Americans either underemployed or unemployed. And nine out of ten Americans over the age of 65 are facing cuts in their Social Security in order to pay for a debt which grew from tax cuts for the rich and for endless wars.

There is a massive transfer of wealth from the American people to the hands of a few and it’s going on right now as America’s eyes are misdirected to the political theater of these histrionic debt negotiations, threats to shut down the government, and willingness to make the most Americans pay dearly for debts they did not create.

These are symptoms of a government which has lost its way, and they are a challenge to the legitimacy of the two-party system.

And Michael Hudson – who is as far from a knee-jerk conservative as possible – hits the same theme with both barrels blazing:

[Interviewer]: So, what do you think? Good versus evil. We’re playing out the debt struggle and the debt ceiling issue. And if we don’t raise the debt ceiling, we’ll be in the apocalypse. What do you make of it all?

HUDSON: I think it’s evil working with evil…. If you have to choose between paying Social Security and Wall Street, pay our clients, Wall Street.

***

What’s inefficient? Paying for people on Medicaid. Got to cut it. What’s inefficient? Medicare. Got to cut it. What’s inefficient? Paying Social Security. What is efficient? Giving $13 trillion to Wall Street for a bailout. Now, how on earth can the administration say, in the last three years we have given $13 trillion to Wall Street, but then, in between 2040 and 2075, we may lose $1 trillion, no money for the people?

***

It’s not about the debt ceiling. It’s about making an agreement now under an emergency conditions. You remember what Obama’s staff aide Rahm Emanuel said. He said a crisis is too important to waste. They’re using this crisis as a chance to ram through a financial policy, an anti-Medicare, anti-Medicaid, anti—selling out Social Security that they could never do under the normal course of things.***

They’re not going to cut back the war in Libya.

***

They’re going to have to decide what to cut back. So they’re going to cut back the bone and they’re going to keep the fat, basically. They’re going to say–they’re going to try to panic the population into acquiescing in a Democratic Party sellout by cutting back payments to the people–Social Security, Medicare–while making sure that they pay the Pentagon, they pay the foreign aid, they pay Wall Street.

[Interviewer]: Yeah. But what–I hear you. But what I’m–I’m saying, what could be an alternative policy? For example, don’t raise the debt ceiling. Number two, raise taxes on the wealthy. Number three, cut back military spending. I mean, there are ways to do this without having to borrow more money, aren’t there?

HUDSON: Of course.

***

Of course they could cut back the fat. Of course what they should do is change the tax system. Of course they should get rid of the Bush tax cuts. And the one good thing in President Obama’s speech two days ago was he used the term spending on tax cuts. So that’s not the same thing as raising taxes. He said just cut spending by cutting spending on tax cuts for the financial sector, for the speculators who count all of their income that they get, billions of income, as capital gains, taxed at 15 percent instead of normal income at 35 percent. Let’s get rid of the tax loopholes that favor Wall Street.

***

Mr. Obama has always known who has been contributing primarily to his political campaigns. We know where his loyalties lie now. And, basically, he promised change because that’s what people would vote for, and he delivered the change constituency to the campaign contributors…

Unchecked Financial Speculation Drives Oil Price Hikes; Is There A Scam Behind The Rise In Oil And Food Prices?

In Uncategorized on May 13, 2011 at 1:50 pm

Oldspeak“Approximately 60 to 70 percent of the oil contracts in the futures markets are now held by speculative entities. Not by companies that need oil, not by the airlines, not by the oil companies. But by investors who profit money from their speculative positions.” -Dan Gilligan, president of the Petroleum Marketers Association.  It’s a scam folks, it’s nothing but a huge scam and it’s destroying the US economy as well as the entire global economy but no one complains because they are ‘only’ stealing about $1.50 per gallon from each individual person in the industrialized world.” -Phil Davis, Financial Expert. The debate in washington over cutting oil subsidies is another manufactured issue, diverting attention from the true cause of rising oil and commodities prices; unregulated, unchecked financial speculation and derivatives trading. Coincidentally the cause of the recent crash of the global economic system. Recently passed “financial reform” did nothing to reform this fatally flawed financial system. A simple and totally correctable (stricter regulation) flaw; corporate media, corporate economists,  no one is talking about it. “no one wants to talk about, because so many powerful people armed with legions of lawyers want unquestioning allegiance, and will sue you into silence.”- Danny Schechter. High gas prices are being used by Big Oil and their minions in the Congress to push for more offshore drilling, and as a grab of oil production by major multinationals from smaller oil companies. Naked oligarchy rules the day in America.

By Danny Schechter @ The News Dissector:

The global economy and its recovery, and the living standards of millions of plain folks, are now at risk from the sudden rise in oil and commodity prices.

Gas at the pump is up, and going higher. Food prices are following.

The consequences are catastrophic for the global poor as their costs go up while their income doesn’t. It’s menacing American workers too, who in large part have not seen a meaningful raise since the days of Reagan (keeping it this way is clearly behind the current flurry of attacks on unions).

Already, unrest in the Middle East and many African countries is being blamed for these dramatic increases. It seems as if this threat to global stability is being largely ignored in our media, one that treats the oil business as just another mystical world of free market trading.

Why is it happening? Why all the volatility? Is oil getting scarcer, leading to price increases? Is the cost of food, similarly, a reflection of naturally increasing commodity prices?

While it’s true that natural disasters and droughts play some role in this unchecked price inflation, it also seems apparent that something else is attracting increasing attention, even if most of our media fails to explore what is a political time bomb, while most political leaders shrug their shoulder and ignore it.

President Obama recently said there is nothing he can do about the hike in oil and food prices.

Critics say the problem is that government and media outlets alike refuse to recognize what’s really going on: unchecked speculation!

Not everyone buys into this suspicion. In fact, it is one of more intense subjects of debate in economics. Princeton University economist Paul Krugman pooh-poohs the impact of speculation counter posing the traditional argument that oil prices are set by supply and demand.

The Economist Magazine agrees, summing up its views with a pithy phrase, “Speculation does not drive the oil price. Driving does.”

Others, like oil industry analyst Michael Klare of Hampshire College in the US see demand outdistancing supply:

“Consider the recent rise in the price of oil just a faint and early tremor heralding the oilquake to come. Oil won’t disappear from international markets, but in the coming decades it will never reach the volumes needed to satisfy projected world demand, which means that, sooner rather than later, scarcity will become the dominant market condition.”

Usually you hear this debate in scholarly circles or read it in political tracts where orthodox views collide with more alarmist projections about the oil supply “peaking.”

But officials in the Third World don’t see the subject as academic. Reserve Bank of India Governor Duvvuri Subbarao charges “Speculative movements in commodity derivative markets are also causing volatility in prices,” he said.

The World Bank is meeting on this issue this week because it is seen as a matter of “utmost urgency.”

“The price of food is a matter of life and death for the very poorest people in the world,” said Tom Arnold, CEO of Concern Worldwide, the international humanitarian agency, ahead of his participation at The Open Forum on Food at World Bank headquarters.

He adds, “…with many families spending up to 80% of their income on basic foods to survive, even the slightest increase in price can have devastating effects and become a crises for the poorest.”

Journalist Josh Clark argues on the website “How Stuff Works” that much of the oil speculation is rooted in the financial crisis, “The next time you drive to the gas station, only to find prices are still sky high compared to just a few years ago, take notice of the rows of foreclosed houses you’ll pass along the way. They may seem like two parts of a spell of economic bad luck, but high gas prices and home foreclosures are actually very much interrelated. Before most people were even aware there was an economic crisis, investment managers abandoned failing mortgage-backed securities and looked for other lucrative investments. What they settled on was oil futures.”

The debate within the industry is more subdued, perhaps to avoid a public fight between suppliers and distributors who don’t want to rock the boat. But some officials like Dan Gilligan, president of the Petroleum Marketers Association, representing 8,000 retail and wholesale suppliers has spoken out.

He argues, “Approximately 60 to 70 percent of the oil contracts in the futures markets are now held by speculative entities. Not by companies that need oil, not by the airlines, not by the oil companies. But by investors who profit money from their speculative positions.”

Now, a prominent and popular market analyst is throwing caution to the wind by blowing the whistle on speculators.

Finance expert Phil Davis runs a website and widely read newsletter to monitor stocks and options trades. He’s a professional’s professional, whose grandfather taught him to buy stocks when he was just ten years old.

His website is Phil’s Stock World, and stocks are his world. He’s subtitled the site, “High Finance for Real People.”

He is usually a sober and calm analyst, not known as maverick or dissenter.

When I met Phil the other night, he was on fire, enraged by what he believes is the scam of the century that no one wants to talk about, because so many powerful people armed with legions of lawyers want unquestioning allegiance, and will sue you into silence.

He studies the oil/food issue carefully and has concluded, “It’s a scam folks, it’s nothing but a huge scam and it’s destroying the US economy as well as the entire global economy but no one complains because they are ‘only’ stealing about $1.50 per gallon from each individual person in the industrialized world.”

“It’s the top 0.01% robbing the next 39.99% – the bottom 60% can’t afford cars anyway (they just starve quietly to death, as food prices climb on fuel costs). If someone breaks into your car and steals a $500 stereo, you go to the police, but if someone charges you an extra $30 every time you fill up your tank 50 times a year ($1,500) you shut up and pay your bill. Great system, right?”

Phil is just getting started, as he delves into the intricacies of the NYMEX market that handles these trades:

“The great thing about the NYMEX is that the traders don’t have to take delivery on their contracts, they can simply pay to roll them over to the next settlement price, even if no one is actually buying the barrels. That’s how we have developed a massive glut of 677 Million barrels worth of contracts in the front four months on the NYMEX and, come rollover day – that will be the amount of barrels “on order” for the front 3 months, unless a lot barrels get dumped at market prices fast.”

“Keep in mind that the entire United States uses ‘just’ 18M barrels of oil a day, so 677M barrels is a 37-day supply of oil. But, we also make 9M barrels of our own oil and import ‘just’ 9M barrels per day, and 5M barrels of that is from Canada and Mexico who, last I heard, aren’t even having revolutions. So, ignoring North Sea oil Brazil and Venezuela and lumping Africa in with OPEC, we are importing 3Mbd from unreliable sources and there is a 225-day supply under contract for delivery at the current price or cheaper plus we have a Strategic Petroleum Reserve that holds another 727 Million barrels (full) plus 370M barrels of commercial storage in the US (also full) which is another 365.6 days of marginal oil already here in storage in addition to the 225 days under contract for delivery.”

These contracts for oil outnumber their actual delivery, a sign of speculation and market manipulation, as oil companies win government authorizations for wells but then don’t open them for exploration or exploitation. It’s all a game of manipulating oil supply to keep prices up. And no one seems to be regulating it.

What Phil sees is a giant but intricate game of market manipulation and rigging by a cartel—not just an industry—that actually has loaded tankers criss-crossing the oceans but only landing when the price is right.
“There is nothing that the conga-line of tankers between here and OPEC would like to do more than unload an extra 277 Million barrels of crude at $112.79 per barrel (Friday’s close on open contracts and price) but, unfortunately, as I mentioned last week, Cushing, Oklahoma (Where oil is stored) is already packed to the gills with oil and can only handle 45M barrels if it started out empty so it is, very simply, physically impossible for those barrels to be delivered. This did not, however, stop 287M barrels worth of May contracts from trading on Friday and GAINING $2.49 on the day. “

He asks, “Who is buying 287,494 contracts (1,000 barrels per contract) for May delivery that can’t possibly be delivered for $2.49 more than they were priced the day before? These are the kind of questions that you would think regulators would be asking – if we had any.”

The TV news magazine 60 Minutes spoke with Dan Gilligan who noted that, investors don’t actually take delivery of the oil. “All they do is buy the paper, and hope that they can sell it for more than they paid for it. Before they have to take delivery.”

He says they make their fortunes “on the volatility that exists in the market. They make it going up and down.”

Payam Sharifi, at the University of Missouri-Kansas City, notes that even as the rise in oil prices threatens the world economy, there is almost total silence on the danger:

“This issue ought to be discussed again with a renewed interest – but the media and much of the populace at large have simply accepted high food and oil prices as an unavoidable fact of life, without any discussion of the causes of these price rises aside from platitudes.”

What can we do about that?

News Dissector Danny Schechter wrote an introduction to the recent reissue of a classic two-volume expose of John D. Rockefeller’s The Standard Oil Company, one of the top ten works top works of investigative reporting in America. (Cosimo Books) Comments to dissector@mediachannel.org

Despite Rhetoric, Cutting Oil Subsidies Would Have Little Effect on Gas Prices

By Nicholas Kusnetz @ Pro Publica:

Democrats renewed their push to cut oil subsidies this week, saying high gasoline prices and big revenues for oil and gas companies make this as good a time as any to eliminate billions in annual tax incentives to the industry. Republicans countered that higher taxes on oil companies would only mean higher prices for consumers.

Most experts agree, however, that the tax incentives in question don’t have much effect on gasoline prices, one way or the other.

“The impact would be extremely small,” said Stephen Brown, a professor of economics at the University of Nevada, Las Vegas. Brown co-wrote a study in 2009 arguing that if the subsidies were cut, the average person would spend, at most, just over $2 more each year on petroleum products.

This isn’t the first time Congress has debated the pros and cons of cutting the tax subsidies. President Obama has proposed eliminating some $4 billion in subsidies in each of his annual budgets since entering office in 2009 (the liberal Center for American Progress has a good breakdown of the President’s proposal). Senate Democrats this week introduced an alternative plan that would cut a little more than half as much, by targeting only the largest oil companies.

From the beginning, the Treasury Department has said the President’s proposal would raise prices at the pump by less than a cent per gallon at most. Brown’s study, produced for the non-partisan think tank Resources for the Future, came up with similar results. Even the American Petroleum Institute, which opposes cutting the subsidies, said in a press release on Monday that eliminating them wouldn’t affect gas prices.

The argument offered by Senate Majority Leader Mitch McConnell and other Republicans who oppose cutting the incentives is that it would drive up costs for oil and gas companies and ultimately reduce production and supply, leading to higher prices. (Domestic production, incidentally, has increased 10 percent over the last two years, and more oil wells were drilled in the U.S. last year than in any since 1985.)

As the Treasury Department’s analysis showed, the numbers don’t support McConnell’s assertion. Treasury’s Alan B. Krueger told a congressional subcommittee in 2009 that cutting tax incentives to the oil industry would raise costs by less than 2 percent and lead to a reduction in output of only one half of one percent. The United States produces about 10 percent of the world’s oil supply and holds less than 2 percent of global reserves. Since oil is a globally-traded commodity, a small drop in U.S. production would have an even smaller effect on the global price of oil.

In its 2012 budget proposal, the Obama Administration said cutting a number of tax breaks for the oil and gas industry would save more than $43 billion over the next decade. Republicans have opposed attempts to pass those subsidy cuts, most recently byrejecting attempts to attach them to a series of Republican-sponsored bills that aim to expand domestic drilling. On Tuesday, Senate Democrats introduced a bill that would cut subsidies only for the five biggest oil and gas companies, a more targeted plan that sponsors say would save $21 billion over the next 10 years.

There are other reasons why people support or oppose cutting these subsidies, including their effect on the budget deficit, job creation, reliance on foreign oil and interference in the free market. The President’s proposal could also shift more production from smaller oil companies, which tend to operate less productive wells, to the big multinationals, said Brown, the University of Nevada economist. The National Journal hosted a blog forum last week that gets into many of those arguments. Today, the Senate Finance Committee will host CEOs from the big five oil companies to discuss the topic.

Gas prices also have been the rallying cause for another set of proposals in Congress that would speed permitting and expand offshore drilling. House Republicans passedtwo of those bills in the last couple of weeks. A number of studies and reports have argued that the biggest of those proposals, expanded offshore drilling, probably wouldn’t affect gasoline prices much either.



Follow

Get every new post delivered to your Inbox.

Join 398 other followers