This page has been archived and commenting is disabled.
Prez to AG – “Get Krasting”
So the president of the United States has ordered the Attorney General
to go after the speculators who have been drive up the price of oil and
therefore gas. What can I say about this? Does the President think the
American people are stupid? No one is going to fall for this line of
crap.
Up front, let me acknowledge my guilt in this matter. I’m a speculator. I
try my best at it. Some of my best friends are speculators. Many of my
readers are speculators. In one-way or the other we are all speculators.
Those that don’t think they speculate are actually speculators.
My local oil delivery company let’s me play in the big casino. I bought
an option at a fixed price for 5,000 gallons of heating oil. The premium
for the option was 20 cents a gallon. So I paid them $1,000 cash. That
was sort of gambling money. If the cash price were to fall I’d get the
lower price. If it rises, my cost is locked in. Last I looked I was 70
cents in the money. My option cost was 20 cents so I’m “up” 50 cents on
5,000. That’s $2,500 so I’m feeling good on this spec.
It’s not hard to find ways to make money in a rising energy market. I
don’t have the balls to trade Brent futures. I overweight energy names
in the global stock market. It’s worked pretty well.
I have some investments with funds that do trade energy futures (a
“macro” directional fund). They’ve been doing great. I have nothing to
do with their market bets, but since I (and many others) provide the
equity I have to take some responsibility for their actions.
So if the AG is looking for someone who’s hands are “dirty”, well, I guess I’m on the list. If he did look me up, I would tell him that it was the Ben Bernanke that told me to do it. If the Justice Department wants to lean on me they also have to lean on the Fed.
If the AG, Eric Holder, bothered to look it wouldn’t be too hard for him
to see that the blame for all this speculating can be laid at the feet
of the Fed. Mr. Holder will not need a PhD in Economics to make this
conclusion. All he has to do is read the FAQ’s on the home page of the Federal Reserve. From the FAQ (link):
Monetary policy also has an important influence on inflation. When the federal funds rate is reduced, the resulting stronger demand tends to push wages and other costs higher.
Ah! This is easy. When the Federal Funds rate is low,
inflation rises. The price of goods rise! So what is the policy on
Federal Funds? Also easy. It has been ZERO for the past two and a half years! What’s the outlook for ZERO interest rates being maintained? That’s easy too!! The Fed tells us every six weeks or so:
Interest rates will be kept exceptionally low for an extended period of time.
So the Fed is telling us in its FAQ that they want goods to go up in
price. Now all they have to do is push me into action as a speculator.
More from the FAQ:
policy actions can influence expectations about how the economy will perform in the future, including expectations for prices
To me, this is pretty clear, hopefully Holder will agree.
The Fed has succeeded in its effort to change my expectations of the
future of my energy costs. With my expectations being influenced, it is
only natural that I would react. When I pay $1,000 to lock in a price to heat my home it is exactly what Bernanke would want me to do. I’m the best evidence that he has that his policy is “working”.
I think most Americans understand that we import half our oil and that
the value of the dollar is a big factor in the price we pay for crude. A
weak dollar causes the price of oil to rise. So what's the Fed’s
policy on the dollar? Once more from the FAQ:
movements in the exchange value of the dollar represent an important consideration for monetary policy--such movements exert influence on U.S. economic activity and prices
Bingo! The desired consequence of the Fed’s monetary
policy is to devalue the dollar in order to increase economic activity.
But that same action also results in higher imported prices for crude.
The only conclusion that I can come to is that higher oil prices are the
desired consequence of Fed policy. Bernanke has brought
me to the water and strongly suggested I should drink some. It's all
spelled out in the FAQs. Its not hidden in some obscure language. Shame
on me (and the President) if I had ignored such an obvious outcome.
The President and the AG need to determine why folks like me are
speculating rather than just blaming me for high prices. When they look
at the facts they can’t help but see that it is Bernanke that’s behind
all that high priced gas. The speculators like me are just the mechanism
that Bernanke uses to achieve his ends.
»
- advertisements -
I apologise because I think I didn't explain myself, and we are arguing about definitions. Investing is speculation if you think about it. Almost everything can be. Heck, we speculate when we dress in the morning: will the weather be cold? warm? etc.
What I want to get at is whether something is productive and not. Easy test: is it a zero-sum transaction? If you take delivery of a commodity, then you're using it. It is relevant to you that it was produced. You get the benefit of the good, and the producer gets the profit from having produced it. But if you just swap pieces of paper, who cares if there is any actual production behind them? You are buying and selling fiat, that's it.
Bruce I can see that you're a smart guy, and I think that your talents would do more good working as an engineer, for example. Lord knows we have many things that need fixing or redesigning. I don't kid myself that you make way more money doing what you do. That's what our economy has become and you're playing the game as best you can. I'm just not sure why you should be especially proud of it.
And of course this is political eyewash. Even though I believe something should be done to de-financialise the economy, I don't think for a second that Soetoro and his Wall St. masters will ever do anything that is in the public interest, or even the interest of those outside of their clique.
So, when I bought shares of Dow Chemical in 1992, betting that they would have increased earning in future years, was I speculating or investing? Does anyone in Washington have any method(s) to tell the difference? Sorry, but Obamatron is simply applying some political eyewash for the Ignorati, nothing more.
Apparently the red diapers, public sector resume and celebrity rainbow ride can still (at this late date) prevent Obama from connecting the dots that incentives matter even though his last and only hope of avoiding another crash is predicated on and explicit about the fact that incentives matter. Amazing.
Position Limits, Bitchez!
Bruce,
Good post but I don't think you have to worry about them coming for you - your piece is too informed and intelligent about market function. "They" would get about a paragraph in and have to give up. No matter what frame of reference ( politics, finance, etc) you use for the current administration, the mind numbing incompetence is always on display with a constant sneer of arrogance for good measure.
Barack Obama was the favorite son candidate of the Democratic Congress. He was never intended to be more than an empty suit enabling the long wish list of their ideology. He dd not have the resume to be a Committee chairman much less the President of the United States. He and his political cronies can only generate ideas out of their limited, traditional playbook.
Were it not for the willingness of his fellow ideologues, this would make for a 2012 election filled with unintended bumbling leading to electoral disaster with a great many laughable fumbles along the way. Mixing the ineptitude of Carter with the political ruthlessness of Nixon, Barack Obama has roughly another 21 months to make us all rue the day he was elected President.
barliman
Only One Way to Fight Back:
GET SILVER!
This is the funniest thing since WIN. "Whip Inflation Now!". Remember those silly buttons? Walking around wearing one was like sporting a sign reading "I am a clueless idiot".
And who could forget Meredith Wilson's catchy song for the WIN campaign:
Win! Win! Win!
We’ll win together, win together!
That’s the true American way, today
Who needs inflation?
Not this nation!
Who’s going to pass it by?
You are and so am I.
Win together: lose? Never.
If you can win, so can I.
I tried to find a youtube link for that, but there doesn't appear to be one. There needs to be.
I saw a bumper sticker on a car recently,
it said "buy American!", needless to say, I almost pissed my pants laughing, we dont make anything, we just wash each others cars,
sell each other Pizza or advice etc:
Buy American, where at, Wall-Mart?
America still makes Silver and Gold Eagle coins, buy them! :>D
ARRA, Amazing Raping of Resouceful Americans aka: american recovery and reinvestment act
Thanks for the laugh and the visual! Do you have your tin cup ready?
"So if the AG is looking for someone who’s hands are “dirty”, well, I guess I’m on the list. If he did look me up, I would tell him that it was the Ben Bernanke that told me to do it. If the Justice Department wants to lean on me they also have to lean on the Fed."
Good analysis, but very wordy. May I summarize for those that didn't read the entire post:
story: So the president of the United States has ordered the Attorney General to go after the speculators who have been drive up the price of oil and therefore gas.
analysis: LMAO
Pres. is not into that profit making speculating stuff, having never worked at a real job and raised with the assumption that all wealth is the governments' and if privately held was ill gotten on the backs of the workers who pay union dues.
Even so, Barry thinks blacks should be able to say: "I tried to speculate" so the great oil pigford case would begin.
Wish ZH had an 'agree' button to click.
Someday, someone, will ask The Bernank, unawares: "Who are you?"
He loves Obama... he loves Obama not....
Seriously, community, you disappoint me.
Any red teamer who was not disabused of their ideology by president Bush, any blue teamer who was not disabused of their ideology by president Obama, needs to start looking at the way they think about things. And question whether or not they do. Think about things, that is.
Latest from CREEP: Committee to RE-Elect the President
Expect many more Hot Air Announcements from the Telepromptering-Moron-in-Chief...
It's Idiot Obummer Campaign Season
Let's kick off the cynical campaign season by directing clueless lackeys like "Empty Suit" Holder to get on whatever the latest poll says the citizens hate most about the Wall Street puppet and his House of Tools...
Classic Obummer
Big announcement... no action. This bitch is all hot air.... Get the hook for this Douche... I'm putting my voting foot right in Obummer's ass come 2012...
Dear Problem Is...
You are funny!
I hadn't forgot about CREEP, which was hilarious at the time and put me in stitches the first time I read the acronym, but hadn't thought about it for a while and it's just as funny now as it was then, only then it was ironic and now it's just cynical.
Your pacing, your shaping of phrases... your pithiness. Excellent.
Are you from Chicago? Is that why you're so peckish about the president?
All time Nixon blast from the past. I used it constantly in 1996 and 2004...
CREEP: Timeless classic! I was a kid during Watergate and have always loved The CREEP...
Great ironny Bruce. Illustrates the depth of political economic staging, and willingness of our leadership to play theatrics with our future. Shame on Obama whom I voted for. Both parties are resorting to same techniques insuring very bad results for America---a once upon empire of the past that lost its way
Geno-econ, please believe me when I say it has always been this way and always will be this way. Nothing ever changes after elections, it's just new faces and new butts in chairs. That's why my favorite saying is "resist organized crime; vote for no one." It doesn't fix anything but it makes me feel better.
yes, a rising tide raises all boats (or something like that).
So that's why silver, gold, oil, corn, etc. are all rising at the SAME rate!! Brilliant!
Ooops. They're not.
Yep. Gold speculators! Silver speculators!
Corn's deflating because... well, there's deflation.
The Great Ponzi has a sad point, but one worth consideration nonetheless.
You may be put on trial for diseminating rational logic Mr Krasting. Please be careful.
Just an observation but Obama lately has the look of; i have eaten enough shit for you WallStreetmotherfuckers and this sellout was not part of our original deal to elect me and i really dont want to be the president who threw the fight for the people by taking the fake fall and the Republic down with it.
If you're right, the bankers and CPA's would be imprisoned. Also, who is forcing Obummer to fight three wars, and keep 450 foreign military bases open?
The American Military, which took over the country in the early sixty's. It's a military empire; just as empty headed, pointlless and ill-fated as every predecessor it has on the planet.
I agree with you about the danger of being put on trial. Has happened before, will happen again. Clinton sent two people to jail for telling him he shouldn't have blocked airport traffic so that he could have a haircut on his plane. Government has endless taxpayer money to pursue bad intentions.
Regarding the president, those who lie down with dogs should expect fleas.
Do you think Obummer and his cronies can keep the economy going for two more years? Do you think they can fool the people for two more years?
The BOJ's Shirakawa looks to be giving an early signal for more aggressive stimulation to come so the short answer, no pun intended, is probably a yes.
The commodity currencies crossed against the Yen , ie the AUD and CAD have been selling lower as equity indexes and commodities; oil, gold and silver have been running higher.
That is a disconnect that makes me nervous, if I were a cop on the beat.
The notion that the market can turn against and overwhelm the policy makers is beginning to be spoken of as thinkable risk.
It may or may not happen, but I prefer to be in and out of trades on relatively short time horizons and reasonable stops.
Just a guess, but best guess is Shirakawa's comments are probably not a fluke of timing.
Not unless the internet has an accident.
Yes, the plutocrats like Obama (they're all the same stripe, the entire L/R paradigm is a myth invented by or with the Talmudist's approval) have stolen most of the USA wealth. The economic mayhem must be paid for, and if not through price hikes then how? Maybe Prince Obama should try price limits. It worked great for Nixon.
"Does the President think the American people are stupid? No one is going to fall for this line of crap."
You seem to overestimate the intelligence of the average American, unless it was a rhetoric figure.
I don't underestimate the American people. And NO, I don't think they are stupid at all.
How many who read Zero Hedge actually understand monetary policy and its impact on inflation? Most of them.
We may be powerless. We're not stupid however.
Loud applause Loud applause Loud applause Loud applause Loud applause Loud applause Loud applause Loud applause Loud applause Loud applause Loud applause.
What is all this BS about speculating. Speculating is no different than holding onto a good. Although the markets are a little different since their is leverage it is awash when you consider the fact that many of the markets are trading paper and not real goods. Ultimately the price will reflect supply and demand because even though their is leverage their is supply leverage as well with more paper promises for goods than actually exist. But most "speculators" are trading paper for more paper. They aren't actually driving the price up any more than issuing non existant brent, or WTI paper is driving the price down.
If they really go after "speculators" they'll simply create supply shortages.
What a load of shit. The 'free money' addled derivatives peddlers take risks that people who hold real assets could never take.
The banker-gangsters sit around their computer screens all day, watching porn and bidding up the prices of commodities they couldn't identify in the real world, in order to pay for their nightly coke-binge and visit from the escort service.
That's about as 'long-term' as the thinking goes.
If you go after the 'speculators', the market would be more orderly and the SoHo boutiques would sell a few less man-purses!
Other than that, not much would change (gas prices might drop a buck or buck-fifty per gallon, too).
Yes it's BS and stupid, but they have to be seen by the media and public to be "fighting" inflation, and "fighting" high gasoline prices, as if both aren't happening BECAUSE OF government and Fed actions!
But hey, that's politics in the US; has been since I first voted, and probably will be the same when I vote for the last time. Any other way is beyond imagination, though we might become used to something better and different, and might come to like it. I'm not holding my breath, however.
Speculation is playing a game, like casino gambling. The house always wins. Give me a safe, reliable bank with safe, reliable interest. I've learned my lesson about "investing" and "diversification" and all the other honeyed buzzwords.
If investing is so safe, to lucrative, such a sure thing, where's MY yacht?!?!
It's cynical hypocrisy at its worst. The typical crap the political class lives on.
How much does the federal government get from the sale of each gallon? How much do the states get?
Bruce,
You have always struck me as being a nice guy and book smart but terribly, even criminally naive about people and politics. Maybe, just maybe, you are finally waking up? No doubt you voted for Barry, and now you are finally realizing what a monster he is?
I did vote for "Barry". I began to regret it when he appointed Geithner. I gave up when he re-appointed Bernanke.
I doubt that things would be much better if we had elected McCain. He's just an old fart who would have made the same (or worse) mistakes of O.
My problem is that there is not one person who is currently being considered as a candidate that I think is up to the job. How can that be in a country where there is so much depth? Where are these leaders we need so badly???
RON PAUL .............btchz
Honest and intelligent leadership is chewed up quickly within the stench of the Beltway. Pragmatic ideals are chastised and minimized in the Nanny State. I recall in 1974 a wise old man telling me that the Nation's Capitol should be moved to Topeka, Kansas and all D.C. federal buildings should be converted into museums.That doesn't sound outrageous to me anymore.
D E A D, ME THINKS!
Agreed. But this says nothing about the hell inflicted by the two party system.
Didja take a good look at McCain/Palin? We'd be fully occupying Iran by now with two persons so devoted to "Islamo-terrorism" mythology. You want a VP flying Israel's flag in her office?
Yeah, there's no such thing as Islamic terrorists. It's like the KKK and Nazi mythologies made up by those two warmongers Roosevelt and Churchill.
alCIAda: Uncle Sam's very own Arab Legion.
Who's talking about Al Qaeda? Ask the Filipinos, Thais, and Indians if Muslim terrorists exist. They've been around alot longer than the CIA or America. Afghanistan used to be a Buddhist country. Now they are 100% Muslim. I wonder if all of the Buddhists voluntarily converted a few centuries ago.
Afghanistan and Pakistan have turned into Uncle Sam's little terrorist training camps. They operate alongside the CIAs drug dealing.
Not unlike the Golden Triangle you mention, come to think of it ...
Iran would have something to say about that, I think.