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Guest Post: Biggest Market Rigger Is Government Itself

Tyler Durden's picture





 

From Chris Powell of GATA, published in Journal Inquirer

Biggest Market Rigger Is Government Itself

As gasoline prices passed $4 per gallon in Connecticut, Sen. Richard Blumenthal and Rep. Joseph D. Courtney joined President Obama in denouncing "speculators" and urging investigation of manipulation in the oil market. There are a few problems with this.

First is that such investigations have been undertaken before, including investigations by Blumenthal himself during his 20 years as Connecticut's attorney general, and they never found anything more than the OPEC oil producer cartel's public but uneven efforts to support the oil price. Anti-competitive as its activity is, OPEC's formation a half century ago was only a defensive response to the rigging of the currency markets by Western central banks and particularly by the U.S. Treasury Department and Federal Reserve, which were manipulating the value of the world reserve currency, the dollar, the international means of payment for oil, long before OPEC began to try to manipulate the oil price.

The second problem is that there are always speculators in all major markets. There were speculators in the oil market when gasoline last went to $4, in the summer of 2008, again when it crashed to $1.65 at the end of that year, and ever since then as it has risen back to $4. Big players in commodity markets can get away with a lot of manipulation because regulation by the U.S. Commodity Futures Trading Commission is so weak, but as the biggest players are investment banks allied with the government, which wants lower commodity prices, much of that manipulation is actually downward.

Third, and most important, the value of the U.S. dollar as measured in other currencies has fallen about 13 percent over the last year, hitting its lowest point since the dollar's last link to gold was broken in 1971. The dollar's fall reflects the U.S. government's long mismanagement of its finances and the nation's economy.

Any review of market manipulation should start with the biggest manipulator -- the U.S. government itself. With nearly complete secrecy, the Federal Reserve lately has been funneling hundreds of billions of dollars to private financial institutions, purportedly to stabilize markets. Congress and the public have little idea of what actually has been done with this money, nor any idea at all of the private understandings the Fed and Treasury Department have with investment houses like J.P. Morgan Chase that often act as government agents in the markets.

Further, federal law long has established an office in the Treasury Department whose very purpose is market manipulation: the Exchange Stabilization Fund. While it originally was intended to stabilize the dollar against foreign currencies, the fund is authorized to intervene in any market at the discretion of the treasury secretary and president. The law says the fund's decisions "are final and may not be reviewed by another officer or employee of the government."

The Fed and the Treasury Department routinely refuse to answer questions about their secret market interventions. Now that the government bond market is admittedly and almost entirely a Fed operation, even reputable market observers suspect that the government's market intervention has become comprehensive as the government's financial mismanagement has worsened -- that not just the bond market but the dollar and equity markets as well are being held up only because of secret government intervention.

So congressional investigation of market manipulation should start with the government itself -- if members of Congress aren't too scared of what they might find.

h/t JP

 


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Mon, 05/09/2011 - 10:12 | Link to Comment oogs66
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They are horrified about what they'd find if they investigated themselves

Mon, 05/09/2011 - 10:37 | Link to Comment GoldSilverDoc
GoldSilverDoc's picture

Perma-tan Blumenthal.

What a joke.

Mon, 05/09/2011 - 10:10 | Link to Comment Hephasteus
Hephasteus's picture

May 21st is supposedly judgement day. That's gaining alot of steam.

Mon, 05/09/2011 - 10:14 | Link to Comment ZeroPower
ZeroPower's picture

First time i hear of this..

Mon, 05/09/2011 - 10:34 | Link to Comment Crisismode
Crisismode's picture

Who is the judge?

Mon, 05/09/2011 - 11:17 | Link to Comment Whatta
Whatta's picture

I think it's Paula Abdul?

Mon, 05/09/2011 - 12:30 | Link to Comment Hephasteus
Hephasteus's picture

I think it's simon not paula abdul.

Look. I didn't invent this drivel shit. I'm saying it's gaining steam. The guy predicted this shit before and it was wrong. He is taking another dart throw.

Mon, 05/09/2011 - 16:44 | Link to Comment RockyRacoon
RockyRacoon's picture

What the HELL are you talking about?  Who... predicted what?

I think yer basketti done fell off the wall.

Mon, 05/09/2011 - 10:46 | Link to Comment BoNeSxxx
BoNeSxxx's picture

What is the point of a two sentence amiguous post like this?  Are you conveying real intel about the markets here or spewing some Jehovah Witness drivel?

Mon, 05/09/2011 - 10:47 | Link to Comment Diogenes
Diogenes's picture

Nut religion drivel.

Mon, 05/09/2011 - 11:19 | Link to Comment PrDtR
PrDtR's picture

YOU.. better get saved.. atheists are coming back from death reporting they saw.. H  E   L    L!

Who you gonna beleve.. the guy here calling it drivel OR the die hard ATHEIST who is seen on video "crying" about what they saw.. OPEN YOUR EYES.. its ALL related..

www.youtube.com/amgineco  .. see playlist: "Religion -Former Atheists"

 

GET SAVED NOW!

Mon, 05/09/2011 - 11:37 | Link to Comment ThisIsBob
ThisIsBob's picture

 

Savings are down, I believe.

Mon, 05/09/2011 - 12:16 | Link to Comment cranky-old-geezer
cranky-old-geezer's picture

Seems I know WAY better what the bible says than you do, and it says NOTHING about an "ever-burning hell", NOR does it say ANYTHING about "getting saved", it clearly says there are NO guarantees.

So take your "christian" BULLSHIT somewhere else, we're not buying.

Mon, 05/09/2011 - 13:33 | Link to Comment Dr. Acula
Dr. Acula's picture

>YOU.. better get saved.. atheists are coming back from death reporting they saw.. H  E   L    L!

Or instead of listening to anecdotes about people's acid trips, consider this:

  http://www.simulation-argument.com/simulation.html

  ARE YOU LIVING IN A COMPUTER SIMULATION?

  BY NICK BOSTROM

  Department of Philosophy, Oxford University

 

Mon, 05/09/2011 - 11:13 | Link to Comment Missing_Link
Missing_Link's picture

May 21 is a *SATURDAY*.  Markets are closed that day.

So unless you're literally referring to the Four Horsemen of the Apocalpyse, I'm pretty sure the markets won't be doing much that day.

Mon, 05/09/2011 - 11:15 | Link to Comment serotonindumptruck
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See you on May 22nd.

Mon, 05/09/2011 - 10:12 | Link to Comment TruthInSunshine
TruthInSunshine's picture

The Ben Bernank & The William Dudley want more debt slaves. 'Don't be afraid, debt slave sheeple - borrowing from banks to pay for what you can't afford to buy absent credit is good for you, us, the economy, and Keynesianism.'

 

05-09 10:01: Fed says US household debt increases 0.3% in first quarter, sees greater willingness of banks to lend
Mon, 05/09/2011 - 10:31 | Link to Comment longhardbull
longhardbull's picture

They always win, not this time

Mon, 05/09/2011 - 13:52 | Link to Comment TruthInSunshine
TruthInSunshine's picture

They rarely win, Cochise.

Think of all the central bank and sovereign sponsored moments of spectacular failures, many and incredibly, throughout history.

They are full of fail.

The Bernank will be but the latest footnote under Merriam-Webster's definition for fail. He already garned a significant note for the efforts of the 'Bernanke Put' in 2007 (which not only failed to save the 'markets,' but saw them implode).

Bernanke will swing and miss, again and again.

Mon, 05/09/2011 - 10:16 | Link to Comment JustPrintMoreDuh
JustPrintMoreDuh's picture

With leaders like these, who needs organized crime?

Mon, 05/09/2011 - 11:49 | Link to Comment Urban Redneck
Urban Redneck's picture

Blumenthal and Courtney are the sole property of the Connecticut Hedge Fund Mafia.  Their calls for investigation will go nowhere and very existence of organized crime can be denied. 

Mon, 05/09/2011 - 10:15 | Link to Comment RobotTrader
RobotTrader's picture

Looks like TPTB is still buying retail stocks.

Ross Stores, Costco, Abercrombie, Limited Brands, Whole Foods, etc. on the verge of breaking out to new highs as we speak.

Mon, 05/09/2011 - 10:30 | Link to Comment SheepDog-One
SheepDog-One's picture

Too bad youre only an onlooker commentator.

Mon, 05/09/2011 - 11:23 | Link to Comment Bay of Pigs
Bay of Pigs's picture

Hey Robot,

Chris Powell is a friend of mine and you couldn't carry his jockstrap in a debate on this subject. No wonder you throw out meaningless shit in an attempt to hijack the thread.

Silver up almost $5 since friday. We see $40 and then you're bullish again right? 

Mon, 05/09/2011 - 11:32 | Link to Comment gjp
gjp's picture

Today it's all about Amazon, with high volume as they attempt to print a new high on this margin-free, tax-dodging retailer of (usually foreign-made) products to the overindebted and up-to-their-eyeballs-in-stuff consumer.  100x earnings for that?  Hey, why not?

Mon, 05/09/2011 - 12:38 | Link to Comment Sophist Economicus
Sophist Economicus's picture

tax-dodging retailer of (usually foreign-made)

 

Wow!   New speaking points being issued at union halls and state tax collection agencies

Mon, 05/09/2011 - 10:16 | Link to Comment lynnybee
lynnybee's picture

basically, i'm in heart failure about all the shit i'm learning !    it's all so outrageous !   when & where is the revolution ?   ...... rigging of all markets / false flag events / lying ....... here's what's got me all in a tither today ~~ it's all TREASON !   These people need to be hunted down & put in prison ...... OR WORSE !

    http://www.youtube.com/watch?v=d679JVfRcOM&feature=feedu_more

 

Mon, 05/09/2011 - 10:33 | Link to Comment SheepDog-One
SheepDog-One's picture

Thats why theres the daily 3 ring circus clown show, to keep the new middle class food stamp and unemployment crowd placated a bit longer...just bread and circuses for the idiots till SHTF!

Mon, 05/09/2011 - 10:51 | Link to Comment HoofHearted
HoofHearted's picture

lynnybee, you really may not want to watch "V for Vendetta." It was a dose of cold water like "The Matrix." I'm just waiting for the next Guy Fawkes and upset that I don't have what it takes to be him. We need the revolution and certain terrorists like Thomas Jefferson, Samuel Adams, Paul Revere, and Thomas Paine would likely agree.

Mon, 05/09/2011 - 11:22 | Link to Comment Vendetta
Vendetta's picture

+47

Mon, 05/09/2011 - 13:50 | Link to Comment Dr. Acula
Dr. Acula's picture

>We need the revolution and certain terrorists like Thomas Jefferson, Samuel Adams, Paul Revere, and Thomas Paine would likely agree.

These guys helped install our current system of subjugation and yet you revere them as heroes.

Read Rothbard.

Mon, 05/09/2011 - 10:54 | Link to Comment samsara
samsara's picture

keep your powder dry Lynny

For every season...

Mon, 05/09/2011 - 10:56 | Link to Comment Manthong
Manthong's picture

I vote for "or worse".

Mon, 05/09/2011 - 10:59 | Link to Comment Diogenes
Diogenes's picture

Read Matt Taibbi's stuff if you want to know what is going on in the financial arena. Things have gotten to the point where there is no turning back and no cure. All we can do is secure our own future and our families.

Mon, 05/09/2011 - 15:50 | Link to Comment gall batter
gall batter's picture

heard a Taibbi interview that aired at the end of April.  he said that Americans are used to the level of corruption and feel powerless.

Mon, 05/09/2011 - 11:06 | Link to Comment PrDtR
PrDtR's picture

You are correct.. it is OUTRAGEOUS, and it gets more outrageous each passing day where NOTHING is done about the rigging, the dark pools, the hidden hand of the FED.. this private bank should be raided AND audited immediately.. how many criminals hide behind this false public institution?

Mh

Mon, 05/09/2011 - 11:15 | Link to Comment SwingForce
SwingForce's picture

I like the T word, it fits Henry Paulson.

Mon, 05/09/2011 - 10:17 | Link to Comment mrdenis
mrdenis's picture

Our Government has a crack team on this ...look at who got Bin Laden ...http://i.imgur.com/VWuwQ.jpg

Mon, 05/09/2011 - 10:25 | Link to Comment The Third Man
The Third Man's picture

Yes, our team on crack.

Mon, 05/09/2011 - 10:30 | Link to Comment The Third Man
The Third Man's picture

If what Panetta said is true...that there is no video feed on the military operation...then what the hell are they watching? Reruns of Dancing with the Stars?

Mon, 05/09/2011 - 10:51 | Link to Comment Clampit
Clampit's picture

Porn.

Mon, 05/09/2011 - 10:21 | Link to Comment youngman
youngman's picture

its really shows you how stupid they are for even thinking this...or how big a liars they are...they don´t think their policies have ANY effect on oil consumption...prices..production...importation...they really think they sit on pedestals and rule the world don´t they

Mon, 05/09/2011 - 10:26 | Link to Comment disabledvet
disabledvet's picture

yes they do.  it is their job of course--to THINK they rule the world.  our job is different of course.  nice pic btw--is that "take my wife PLEASE" Youngman?

Mon, 05/09/2011 - 10:24 | Link to Comment RobotTrader
RobotTrader's picture

Now TPTB are pushing tech stocks again via its MarketWatch conduit.

AAPL to be the next $2 trillion company???  Why not $3 trillion?

LOL....I'm not making this up..

"The basic math: Last quarter, Apple’s earnings growth was about 90%
year-over-year. That means, according to many common theories of how you
value a company, that it’s not unreasonable for Apple to trade for 90
times earnings. In the past 12 months the company earned $20 billion.
Ninety times that is $1.8 trillion. We know they are going to grow
earnings. Heck, they might grow 90% again. That might even imply a $3
trillion market capitalization."

http://www.marketwatch.com/story/why-apple-is-going-to-be-worth-2-trillion-2011-05-09?siteid=bigcharts&dist=bigcharts

Mon, 05/09/2011 - 10:39 | Link to Comment Don Birnam
Don Birnam's picture

MW ( a cog in the Dow Jones financial media apparatus, along with "Barron's" ) has unabashedly jumped the shark on this one; a jump of such a magnitude it rates admission to the Pantheon of Absurdities with Arthur Fonzarelli, Cramer and "Winners of the New World," and the reigning Pontifex Maximus of Top-calling Priests, Jim Glassman with his "Dow 36,000."

The top is in, or very nearly so.

Mon, 05/09/2011 - 10:21 | Link to Comment DaveyJones
DaveyJones's picture

speculators, the new terrorists. Even when there's no connection, it's their fault

Mon, 05/09/2011 - 11:02 | Link to Comment mayhem_korner
mayhem_korner's picture

If all you have is a hammer...everything looks like a nail.

Mon, 05/09/2011 - 10:21 | Link to Comment lynnybee
lynnybee's picture

....liars, scammers, deceivers .... an honest person doesn't even have a chance of surviving in America anymore !    my dad was as honest as the day & taught me the same .    i want them all gone , we need a clean sweep to get rid of these lying, awful people !  LIARS & SCAMMERS !

Mon, 05/09/2011 - 10:37 | Link to Comment AbandonShip
AbandonShip's picture

We hear ya Bee.   Feels good to vent hear, right? Kinda therapuetic.

Congress and the President are in charge of fixing these problems. They can come up with root causes, excuses and scapegoats all day BUT THESE ELECTED OFFICIALS are responsible for fixing it. And based on that criteria, they get an F

Time for change (again).  (And perhaps time to look for a new place to live entirely as I'm beginning to think this mess is un-fixable.  Call me un-American if you will.)

Mon, 05/09/2011 - 11:08 | Link to Comment mayhem_korner
mayhem_korner's picture

And perhaps time to look for a new place to live entirely as I'm beginning to think this mess is un-fixable.  Call me un-American if you will.

You're not un-American - you are completely American.  The American ideal is what has been lost here - the notion of "consent of the governed" is gone.  The statist complex has replaced the idea of America - the most prosperous, free and civil idea the planet has ever known, with the idea of Amerikka - the tried-and-true failure of consolidated control which is what our founding fathers sought refuge from 3 centuries ago.

Selah...

Mon, 05/09/2011 - 14:33 | Link to Comment Dr. Acula
Dr. Acula's picture

>The American ideal is what has been lost here - the notion of "consent of the governed" is gone. 

What does that even mean? I don't remember ever signing a contract consenting to be governed. I was born into slavery. And every time the government prints a bond, it creates a false contract putting unwilling third parties and unborn children further into slavery. To the government, human beings are chattel whence labor and money can be extracted even before they are born into this world. These expert criminals even have formulas predicting exactly how much can be stolen from future generations, and thus how much can be borrowed today at their expense.

>the tried-and-true failure of consolidated control which is what our founding fathers sought refuge from 3 centuries ago.

Those "founding fathers" helped set up our current system of subjugation. It's because of them that we get to pay tribute to King Obama rather than King George. Thanks a lot guys. Remember, these guys were the gang of criminals who signed a document ostensibly granting themselves a "right" to commit thefts against their countrymen. When a founding document is based on immoral acts, expect monstrous results.

 

Wed, 05/11/2011 - 08:37 | Link to Comment mayhem_korner
mayhem_korner's picture

No argument on your initial sentiment.

As to the second piece, the Founders did everything possible to limit the potential for consolidation of power.  They were prescient in warning of the slippery slopes that could lead to enslavement.  They were right - but their warnings were simply forgotten, dismissed, or buried by those who would have none of it.  And so the U.S. of A. has gone the way of every other nation - consolidation of power into the hands of the controlling few, and a narrowing of liberty for all of the subjects.

 

Mon, 05/09/2011 - 10:54 | Link to Comment ebworthen
ebworthen's picture

 

We need SEAL teams and other special ops to conduct operations against the domestic terrorists of the U.S. in Washington and Wall Street.

Night ops, nab Barney Frank, Jamie Dimon, Blankfein, Mozillo, Geithner, Buffet, the Bernank himself.

Load them up with Versed (Midazolam) and interrogate them, cameras rolling - "What did you know and when did you know it".

Meanwhile, hack into their cell phone and computer transactions, email, txts's, etc.

Broadcast on a Friday after the markets close and all weekend while shutting down the trading desks of all Wall Street banksters - and letting only individual legal U.S. citizens not involved in the ponzi to trade for a week.

Perp walks, orange jump suits, chained ankles, and scrubbing toilets after that - firing squad for the truly malfeasant (treasonous, really).

 

Mon, 05/09/2011 - 10:26 | Link to Comment Marty Rothbard
Marty Rothbard's picture

My guess is that the feds only consider you a speculator if you buy calls.  You can buy all the puts you want, and still be just an investor.  Unless of course, we are talking about the stock markets, where only speculators buy puts, and investors buy calls.

Mon, 05/09/2011 - 10:30 | Link to Comment Hansel
Hansel's picture

Duh.

Mon, 05/09/2011 - 10:30 | Link to Comment dryam
dryam's picture

It's simply wrong for the free market to fix a certain price.  The price fixing should be completely left up to the government & banks.

Mon, 05/09/2011 - 10:31 | Link to Comment disabledvet
disabledvet's picture

interestingly "their manipultations are all on the long side."  so why the investigations?  i thought "so long as the market's are higher all is well?" and is that "HI-HO Silver" again?  Isn't the lesson of 2008 "don't ever blow up a bubble"?

Mon, 05/09/2011 - 10:28 | Link to Comment lunaticfringe
Mon, 05/09/2011 - 10:34 | Link to Comment disabledvet
disabledvet's picture

i thought the Prez said "no body no crime"?  or was i reading between the lines on that one?  anywho "game over" no matter how any of us look at it.  no follow on as well so "it sounds like straight to the Apres Vous War on Terror Lounge."

Mon, 05/09/2011 - 10:52 | Link to Comment Ident 7777 economy
Ident 7777 economy's picture

That was truly rich ... esp. liked this part:

 

Then came the nutters.

Nutters don't believe anything that the government tells them. They've been lied to for so long that they have given up any kind of hope of government truth telling.

The nutters think Bin Laden was killed years ago. The nutters think Bin Laden's body is in some secret lab somewhere. I've been reading all of the theories on the intarwebs this week.

Nutters are the polar opposite of Moonbats and sheep- Moonbats and sheep either believe or ignore everything that the government tells them. Moonbats and sheep make fun of nutters.

 Moonbats and sheep are just idiots.

There is not much you can do with them. Nutters on the other hand, have intellectually evolved to the point that they cannot trust any thing that the government does. Unlike Monnbats or sheep, they do not ignore facts.

In fact- nutters actually pay attention to government. Sometimes nutters even mention some of their opinions- publicly- only to be criticized and labeled by the Moonbats and sheep who largely ignore anything factual or absent any credible facts of their own, simply launch a counter attack. Government always backs the play of Moonbats and sheep. They have a host-parasite relationship.

 

Mon, 05/09/2011 - 10:31 | Link to Comment Temporalist
Temporalist's picture

Everyone knows if you want to make FRNs be like Robo and Hwanger and Leo and all the other suckass wannabes that never had an original thought in their lives and are standing in line early for implanting groupthink chips into their defective brains.

"Don't fight the Fed.  Buy stocks and bonds."

Mon, 05/09/2011 - 10:34 | Link to Comment optimator
optimator's picture

Blumey is one of THEM, following in Lie Berman's footsteps.

Mon, 05/09/2011 - 10:33 | Link to Comment r101958
r101958's picture

Once again it seems the same posts (posted in 2008-2010) are needed for those that continue to surmise that the oil 'problem' is something other than what it really is:

It is also much easier on the brain-housing-group to just assume that oil is not a finite resource and that
there are endless fields of oil yet to be tapped. Better said, this is the route some folks take that don't do
their homework. Do the homework! Check the meaning of EROEI and then follow up. Check how reliable the ME
statements are regarding 'known' reserves. Also, check out what the real extraction rate is for known
reserves. Then the next time you read an article about a 'huge' find of 20 billion brls you will know that the
world consumes 33+ billion brls of oil a year and that the 'huge' field will have peaked at 10 billion brls of
production. That is assuming that all the oil is actually extractable. Peak oil, check it out. It doesn't mean
we are out of oil....it only means our production of oil has peaked and is slowly declining. This fact does
not bode well for a global economy/financial paradigm that runs, indeed depends, on growth.

Yes, we have oil......but can't produce enough of it at reasonable price (EROEI). That is what peak oil means.
It doesn't mean we are 'running out'. It just means the world can not produce enough to keep up with demand
and indeed the world has reached 'peak' production. This is one reason the world economy is on the rocks. The
world needs ever more inexpensive oil to continue growth and to service debt. That is not happening and we are
seeing the unhappy results. The world burns through better than 33 Billion brls of oil a year. So a find of 20
billions brls, although seemingly large, really is less than a year's supply and that is assuming that all of
the 20 bil brls is actually recoverable.

Aug 2010: I think we can look at oil production throughout the time of the oil price spike in 2008 and see
that production did not really increase. This says quite a bit in and of itself. I believe market price seeks
a point at which increased production drowns further increase in price. This did not happen with oil in 2008. Instead, the economy crashed and oil crashed along with it. This is how I think it will be with peak oil. Each time oil price will increase to the point where it takes too much out of the economy, the economy then contracts and another oil price bottom is found. However, the tops and the bottoms will increase in price as we go into the future. In times of relative peace and little in the way of really bad events the tops and bottoms will increase fairly slowly and within a fairly narrow band. However, were there to be a black swan or important geopolitical event (war in ME?) then those narrow bands will be broached and quickly.

It is going to happen anyway. We consume about 25% of world oil production but only produce about 10%. Do we
really think that the rest of the world will continue to foot the bill for our lifestyle? Don't think so. So,
either we make the changes ourselves, just as I did, or it gets forced on us when the world decides not to buy
our debt anymore. I am open to constructive suggestions as to how we can best help change along (no, and I
don't mean Obama change either). Our populace refuses to accept that resources are finite. What is worse, our
leaders don't tell the truth about it. They keep feeding us platitudes like if they stabilize the economy with
massive money printing that everything will somehow be ok. I have yet to hear them really talk about resource
issues and yes I know why. All we need to do is look at how Carter was excoriated (much deserved for other
things but not for this) for telling us (in 1977) that we were heading into problems with resources.

Just a question.......does anybody here think that the TPTB will ever admit that there is a peak and decline
of oil production? IMO no, they won't. Why? Because of the havoc that it would cause in the markets and
society in general. So, how do they keep things going? ....think extend and pretend, using somebody else's
money (ours, in the form of future taxes). Has anybody here seen the patterns of this game over the last two years? Not enough energy to continue exponential growth to service debt etc. But, they won't address the real problems because if they do then they get chaos.

Nuff said.

Mon, 05/09/2011 - 10:46 | Link to Comment JimBowie1958
JimBowie1958's picture

I am not sure how our consumption of 25% of worlds oil while producing only 10% equates to the world footing our bill for our lifestyle.

How much oil does Germany, Japan or France produce?

Peak oil is manageable in a free market. The root problem is the strangulation of free markets.

Mon, 05/09/2011 - 10:56 | Link to Comment r101958
r101958's picture

We enjoy the lifestyle we now have because of the availability of cheap sources of oil...not in spite of it. We can purchase this oil because other countries buy our debt. Peak oil is not a problem. It is a predicament. What in the free market will mitigate the loss of a resource that can be refined to perform hundreds of man hours of labor for little more than the price of a gallon of milk? If you answer alternative energy then I suggest you check the EROEI of those resources. Along with that check the scalability of them.

Mon, 05/09/2011 - 11:19 | Link to Comment Hansel
Hansel's picture

"We enjoy the lifestyle we now have..."

Speak for yourself.

Mon, 05/09/2011 - 11:25 | Link to Comment samsara
samsara's picture

We enjoy the lifestyle we now have...

I wish we could afford the life we're living.

 

Mon, 05/09/2011 - 12:19 | Link to Comment JimBowie1958
JimBowie1958's picture

Well, it seems to me that a free market's rise in commodity prices spurs the development of new technologies that can replace the old resource.

Current alternative energy options really are not yet attractive because oil is still pretty cheap compared to historic alternatives like muscle power, steam power or wind mills, etc.

But as these oil related costs continue to escalate, more money will be spent on realistic alternatives to oil.

My guess is that we will see the principle of subsidiarity applied to our power grid, and more power produced at the local neighborhood level by micro power generation inorder to reduce power loss along lengthy power lines. The forms of energy used to do this micro generation will probably continue to be coal and oil based for a while, but will gradually change over to solar panels, fusion reactors and stored electrical power in high density devices that excede that of gasoline for energy density.

But it will require higher fuel prices to motivate this technological refinement and conversion and not till then. I am not suggesting that this process will be comfortable or without turmoil, but we wont go back to pre-industrialized methods and life-styles, I feel fairly certain of that and in the long run things will get better.

Mon, 05/09/2011 - 12:29 | Link to Comment JimBowie1958
JimBowie1958's picture

I want you to know I did not junk you, nor have I junked anyone here.

Your response was totally reasonable, and I cant understand why anyone would do that to you r post.

Mon, 05/09/2011 - 15:05 | Link to Comment Dr. Acula
Dr. Acula's picture

I junked him because his response was BS.

>What in the free market will mitigate the loss of blah blah blah...

If the resource runs out completely, then of course NOTHING will mitigate its loss.

And if you knew economics 101, then you'd know that market forces work to conserve scarce resources: speculators sensing a depletion of a good will purchase futures and raise prices to save the good for a future time when it is needed more urgently; rising prices lead to search for substitutes, a search for more of the resource, and efforts to conserve (demand elasticity).

And if you want something better than a free market, then I guess you are smarter than the collective judgement of a multitude of wealthy market participants allocating resources. So, you want an unfree market - now who are you going to point a gun at first? Who will you murder to help establish the oil allocation you desire?

>If you answer alternative energy then I suggest you check the EROEI of those resources.

EROEI is an absurd amalgamation of ideas from disparate sciences: physics and economics. If it costs 10 barrels of oil to deliver 1 barrel of oil to a location where it is urgently needed, then the delivery will make economic sense and will result in a profit, and it will be done, EROEI be damned. Entrepeneurs calculate in dollars and NOT in Joules. 

Tue, 05/10/2011 - 11:34 | Link to Comment JimBowie1958
JimBowie1958's picture

I agree with you about free markets, but I think the Peak Oil theorists are more concerned with resource trend indicators than simple profit taking.

Commodity scarcity almost always makes for greater profits, right?

I am not sure we disagree so much.

Mon, 05/09/2011 - 11:01 | Link to Comment samsara
samsara's picture

Peak oil is manageable in a free market.

Starvation is Managable in a free market.

Peak Oil = The Highest Peak of Per Day production for a given well, field, region.

The result of peak oil is 10 guys each with a empty gas can and only 1 gallon for sale on the market.

 

Let's watch them 'Manage" that.

 

Mon, 05/09/2011 - 11:02 | Link to Comment r101958
r101958's picture

Agreed.

Mon, 05/09/2011 - 12:24 | Link to Comment JimBowie1958
JimBowie1958's picture

I think you are overly pessimistic.

Those ten guys will get their gas cans filled, but they will simply have to pay more for it till they can find alternatives to things that require gas cans.

Mon, 05/09/2011 - 14:49 | Link to Comment Dr. Acula
Dr. Acula's picture

>The result of peak oil is 10 guys each with a empty gas can and only 1 gallon for sale on the market.

 >Let's watch them 'Manage" that.

Good point. I think the best thing would be to have ignorant people who failed economics 101 step in to help. Have the men held at gunpoint, steal their money, and force them to pay for inane boondoggles like corn ethanol, cash for clunkers, middle east wars, and alternative energy research programs guided by neither profit motive nor market disciplines.

Then there will be 10 guys and only 0.1 gallons for sale.

Mon, 05/09/2011 - 10:56 | Link to Comment Ident 7777 economy
Ident 7777 economy's picture

-1 Hard-to-read; your cut-and-paste needs help ...

Mon, 05/09/2011 - 10:58 | Link to Comment r101958
r101958's picture

Thanks. But call 1-800-waaaaah. ;)

Mon, 05/09/2011 - 11:00 | Link to Comment Ident 7777 economy
Ident 7777 economy's picture

It's your choice as to whether you want to crank out stuff for ppl to read or not .. the way it is right now, it  looks like CRAP. WHOLLY unprofessional ...

That is my stated opinion, apparently YMMV ...

BTW, I did not - not yet - junk you ... you are not someone's 'favorite' ...

Mon, 05/09/2011 - 11:03 | Link to Comment r101958
r101958's picture

Sorry if it is difficult for you. Each one of those paragraphs was posted at a different time. They are all pertinent and so I did not change them. The fact is that everybody zeros in on the symptoms of the problem but the basic problem is not addressed for the reasons I mentioned in the posts.

Mon, 05/09/2011 - 20:28 | Link to Comment StychoKiller
StychoKiller's picture

Verily, I saith unto thee:  The Surface of a planet is NOT the correct place for an expanding technological civilization!

Mon, 05/09/2011 - 11:05 | Link to Comment Diogenes
Diogenes's picture

"It doesn't mean we are 'running out'. It just means the world can not produce enough to keep up with demand"

But that's what running out means.

Mon, 05/09/2011 - 11:39 | Link to Comment r101958
r101958's picture

Our predicament becomes much clearer when oil and its availability is linked to our economy and its need for exponential growth and an increasing supply of cheap resources. So long as we view the economy with blinders on and finite natural resources with blinders on then we will accomplish nought. What I mean by this is that when we consider problems with the economy we tend to compartmentalize it to the economic realm only. We do the same with the subject of energy. I submit, however, that where the economy is the body...energy is the blood.

Mon, 05/09/2011 - 15:26 | Link to Comment Dr. Acula
Dr. Acula's picture

>our economy and its need for exponential growth

By some measures the economy has been shrinking for decades so I'm not sure what you're getting at. Yes, the money supply is growing exponentially but that just involves tokens of exchange. It takes almost no effort for Bernanke to add extra zeroes onto our dollar bills.

>So long as we view the economy with blinders on and finite natural resources with blinders on then we will accomplish nought.

Maybe it's you wearing the blinders. Speculators know well that investing their fortunes in scarce resource futures will both help preserve the resource and reward the speculator's wise decision with financial gains. What have you done to preserve resources?

>What I mean by this is that when we consider problems with the economy we tend to compartmentalize it to the economic realm only. We do the same with the subject of energy. I submit, however, that where the economy is the body...energy is the blood.

You misunderstand mankind. Humans operate according to the laws of human action, i.e. praxeology. Energy plays no special role in economics. A barrel of oil has a price just like a potato or a painting does.

Mon, 05/09/2011 - 11:21 | Link to Comment rufusbird
rufusbird's picture

The oil producing countries are glad to sell us oil. Do you think the citizens of SA can make aliving by farming? All we are quibbling about is the price.

Mon, 05/09/2011 - 11:43 | Link to Comment r101958
r101958's picture

Indeed they are but they also need to use more of their own oil to placate their own masses.

Mon, 05/09/2011 - 11:51 | Link to Comment r101958
r101958's picture

Also....posted the following in mid April (at another site):

After reading from quite a few different sources I am of the opinion that Ghawar is in decline which essentially means the KSA is in decline. One of the sources I trusted for factual material was Matt Simmons. He brought up an interesting fact (amongst many) that the Saudis have been using water for quite some time in order to keep production high (Pemex did the same with Cantarell I believe). The problem with this is that when production peaks the downside, or decline, tends to be precipitous.

This may be what is happening with Ghawar. Ghawar has been producing since the early 1950's. It is not so much that Ghawar will quit producing but that its decline may be steep because it used water pressure to keep production high before it reached peak. This may explain why, after the last few times KSA increased production, that production again returned to lower levels so quickly. This last time, the reversion was even quicker. It is not difficult to surmise that every time KSA increases production in this fashion that they are robbing from the future.

Another factor may be that they intend to keep more for domestic use (placate the local populace). As well, they have intimated that they are not really happy about the way Mubarak and Gaddafi were/are being thrown to the curb and so are less likely to force higher production just to help the West.

Mon, 05/09/2011 - 10:37 | Link to Comment willien1derland
willien1derland's picture

Sen. Richard Blumenthal & Rep. Joseph D. Courtney need only contact the Secret Service - Have the Secret Service & any MSM outlet(s) they choose escort them to the Federal Reserve - Stop at Reception - Ask for Ben Bernanke - when he arrives in the Lobby - Arrest Him in front of the MSM cameras & I assure you speculation will be significantly curtailed in ALL MARKETS - Like any Narcotics Officer will tell you - Stop the Pusher is far more effective approach than arresting the users -

Mon, 05/09/2011 - 10:37 | Link to Comment Oh regional Indian
Oh regional Indian's picture

What we continue tro see and read here is a gradual showing of the hand so to speak.

The sub-terranean flows are now coming to surface. And in this fractal life, the earthquakes are coming and going to come at every-level.

This is the kind of time when institutions, literal and figurative, crack.

Plan disclosure, un-intended consquences etc.

ORI

http://aadivaahan.wordpress.com/2011/05/06/movement-water-radioactivity-etc/

Mon, 05/09/2011 - 10:46 | Link to Comment ebworthen
ebworthen's picture

 

Exactly.

As if reflating the markets with TRILLIONS of taxpayer money to bail out central bankers and insurance companies and government itself wasn't speculation and didn't cause commodity prices to skyrocket.

Fools and charlatans.

 

Mon, 05/09/2011 - 10:48 | Link to Comment JimBowie1958
JimBowie1958's picture

Yes, fools and charlatans, but also pirates.

 

And historically we know that the only effective solution to piracy is to hang every one of them you catch, otherwise you are plagued forever.

Mon, 05/09/2011 - 10:59 | Link to Comment ebworthen
ebworthen's picture

Aye.

Let me see...I think I have some rope on me ship...may not have enough though...

Mon, 05/09/2011 - 11:41 | Link to Comment The Navigator
The Navigator's picture

I've got some extra lines on mine, and also some extra chain and anchors.

Mon, 05/09/2011 - 11:49 | Link to Comment The Navigator
The Navigator's picture

dup, sorry

Mon, 05/09/2011 - 12:12 | Link to Comment Pegasus Muse
Pegasus Muse's picture

Jack Sparrow, where are ye?  We need a good pirate to help Slewie clean out the den of corruption.

Mon, 05/09/2011 - 10:49 | Link to Comment Atomizer
Atomizer's picture
The nine most terrifying words in the English language are, 'I'm from the government and I'm here to help.'

- Ronald Reagan

Mon, 05/09/2011 - 10:55 | Link to Comment Clowns on Acid
Clowns on Acid's picture

Wake up and smell the left wing fascism.

Mon, 05/09/2011 - 11:28 | Link to Comment Vendetta
Vendetta's picture

indeed.  Smells just like the right wing fascism

Mon, 05/09/2011 - 11:03 | Link to Comment sbenard
sbenard's picture

Speculation is just the branches. It is a manifestation of the problem, but it is NOT the cause..The cause is government policies, both fiscal and monetary. That is the ROOT of the problem.

This article is spot on!

Mon, 05/09/2011 - 11:01 | Link to Comment Clowns on Acid
Clowns on Acid's picture

The Obama administration announced $2 billion in grants Monday to build and improve intercity passenger-rail service.

The Federal Railroad Administration said $795 million will go toward improving service on Amtrak's Northeast Corridor, increasing top speeds to 160 miles per hour from 135 miles per hour on some segments.

Hey thats only $312.8MM per extra 1 mph. Sounds like a great investment of taxpayer $.

Obama and his fascist pink shirts, are clowns on acid.

Mon, 05/09/2011 - 11:13 | Link to Comment Ident 7777 economy
Ident 7777 economy's picture

Love it; turning back the clock to 'railroad (steel rail)  technology', meanwhile Intel announces a new 22 nm transistor using 3-D construction techniques thereby improving speed and efficiency all the way 'round ... so I have to ask: what happened to 'telecommuting' again?

 

Mon, 05/09/2011 - 12:57 | Link to Comment Sophist Economicus
Sophist Economicus's picture

what happened to 'telecommuting' again?

Union workers (railroad and city infrastructure beneficiaries) and inner city dwellers (subsidized mass transit beneficiaries) don't do that...

Mon, 05/09/2011 - 13:07 | Link to Comment dexter_morgan
dexter_morgan's picture

haha - yep. They've spent 2 years rebuilding, and re-rebuilding the federal plaza (s/b a 2 month job at most) here in Chicago while posting several of those 'economic recovery' signs. One way to keep the few dozen workers doing it employed I suppose, but what a crock.......

Mon, 05/09/2011 - 11:05 | Link to Comment g speed
g speed's picture

IMHO if the military with its spend as much as it takes mentality would stop using all the fuel it takes to run the empire we would find the price of product would drop by half across the board

Mon, 05/09/2011 - 11:12 | Link to Comment The Count
The Count's picture

The US financial and political system is a lot more sinister and corrupt than most will every know or understand. Anybody thinking the Pres can or wants to change anything is naive. THose who do not play along are simply killed. 

Mon, 05/09/2011 - 11:13 | Link to Comment Pepe
Pepe's picture

Congress will not investigate anything of substance, because of course it is part of the "front",setup by the overlords, which we call Government. Maybe the first step is to stop calling this thing "Government"

Mon, 05/09/2011 - 11:22 | Link to Comment JR
JR's picture

“How broken is our system that rewards this behavior?”– Queenbee, Inside the Hive

 'Squatter Rent’ May Boost Spending as U.S. Mortgage Holders Bail (Bloomberg May 6,2011)

Melissa White and her husband stopped paying their mortgage in May 2008 after it reset to $3,200 a month, more than double the original rate. That gave them extra cash to pay off debts and spend on staples until their Las Vegas home sold two years later for less than they owed.

“We didn’t pay it for about 24 months,” said White, who quit her job as a beautician during that period after becoming pregnant with her first child and experiencing medical complications. “What we had, we could put towards food and the truck payments and insurance and health things I was dealing with.” ...

So-called “squatter’s rent,” or the increase to income from withheld mortgage payments, will be an estimated $50 billion this year, according to Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. The extra cash could represent a boost to spending that’s equal to about half the estimated savings generated by cuts to payroll withholding in December’s bipartisan tax plan

White, 28, now has two children, daughter Makenzie, 2, and son Christian, 1. She and her husband, Shannon, a sheet-metal worker, rent a house for $1,425 a month.

“My credit’s back,” she said. “I’d buy a house again, but I’d get a fixed-rate loan.” …

Adam Turner, 43, went eight months without making payments on his Las Vegas townhouse after he quit his job as a casino- restaurant wine steward in November 2009. He stopped paying as “a way of sticking it back to the banks” for pushing mortgages on people who shouldn’t have been qualified, he said

Turner, now a waiter and renting an apartment, used the money he saved by not making mortgage payments to take care of electric and phone bills and buy necessities while he was unemployed.

“It definitely boosted my cash flow, which was helpful to move on with my life,” said Turner, who made almost $100,000 a year before the recession. “It was not like I was celebrating and partying. It was a rough time. It represented the American dream that collapsed around me.”

Mon, 05/09/2011 - 11:39 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

slewie will man up and say it:  audit the PPT!

Mon, 05/09/2011 - 12:25 | Link to Comment cranky-old-geezer
cranky-old-geezer's picture

Wall Street and Washington (in that order) are all that matters now.  Keep Wall Street and Washington going, screw the rest of America.

Mon, 05/09/2011 - 16:42 | Link to Comment AldoHux_IV
AldoHux_IV's picture

Whole heartedly agree, but unfortunately this would never happen-- the system is so twisted and corrupted that anything short of revolution and reform of our government is perpetuating the same crap manipulation, control, and slavery to the centrally planned regime.

Mon, 05/09/2011 - 18:26 | Link to Comment Bartanist
Bartanist's picture

I'm shocked ...

Shocked to hear to discover manipulation going on by the government.

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