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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.
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Golly gee, you betcha!
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Presidents, bad as some (most) are, cannot match congress for corruption, ineptitude, and venality. Just one opinion among millions. Have no use for Obama, just sayin...
That's a keeper! Well said dizzyfingers.
I get your drift. OTOH, the Comm. In Chief actually could bring the troops home and introduce us to a guy named Jefferson, who strongly considered a standing army useless between wars. Of all the obvious evil we source worldwide: What is more evil than sending armed men to other side of the world to kill people?
There is no way, absolutely no way on this earth, any so-called "Christian" could possibly stay true to Christ and take the oath of President. Love your enemies, feed your enemies...this is impossible if you protect a useless nation/useless Constitution from those that wish it harm.
You warmongering "chosenite" Judeo-Churchians have earned hell a thousand times over. The highest of all sacraments for Judeo-Churchianity is war.
Those evil Judeo-Christian boogeymen got ya scared?
You make a good point, one that thinking people should ponder. Another way to state it might be that it's evil to send generation after generation of kids to die in stupid foreign wars (my dad, then my friends, then my friends' kids, now their grandkids) -- whether it's kids from the US or other places.
And the irony of one of the US president's most important jobs being leader of the military isn't lost on me. This grew out of the US revolution, I suppose, as the country was "made by war". And there might be some problems with a military NOT connected to, and answering to, the national government apparatus, but I get your point.
BTW, not everyone in the US avoids questioning their own assumptions, and the country's and politicians' actions. Isn't that part of the function of this site? I'm thankful for it.
as the country was "made by war"
Which country or culture has not been made or defended by the sword?
Not justifying it, just asking. When you realize it is few or none, then you come to the question of why is this so?
When one comes to grips with this answer, the fallen nature of man, then you are on the path to the truth and ultimately freedom.
sschu
Bruce,
Sloppy reporting to show your partisan politics. Go back to read Mike Masters' testimony:
http://hsgac.senate.gov/public/_files/052008Masters.pdf
Same shit is happening all over again except this time it's worse. This time we also have fundamental shifts in demand in emerging economies boosting the price of oil even higher.
That's some weak shit, Leo.
Partisan? Nah.
Maybe someone will call you partisan in a few months after some political bullshit artist calls out you pension assholes.
You are a protagonist, Leo. No doubt. And you make people mad. Too bad you cannot make more think which I bet is your real intent.
Point being there are holes in the demand arguement driving price. It is more or less the same as when the ECONOMIST made the same case in 2005 over the emergence of China.
Pulling a deep, obscure reference-rabbit like Masters testimony out of the hat doesn't cut it for me. For one reason it is not close to contemporary in the context of the much more leading edge concentric role assumed by central banks in the design of monetary and social poilcy..........the general public being comatose in this respect.
I may be wrong, however it is a nagging feeling which I cannot put words to at the moment, but I think the real story is in the price of the Yen.
The Japanese may have a debt in the order of 200% of GDP, but still owe no debt abroad, have vast reserves of foreign currency, a sophisticated culture that has endured unspeakable tragedies, and has a very deep history along with its ever longer memory.
Maybe we can all contribute a bit to buy Leo and akak a private table at Chez Paris for the French Easter Bunnies' parade.
A wonderful and generous suggestion, RoRo!
Please just make sure that you buy each of us a separate private table.
You are a scholar, gentleman, and a fighter, akak.
I think Leo is also a fighter, informed and with a purview of some of the finest naked art on the planet, maybe a match of wbz7's.
Thanks for being in, and there is no end to it all.
Yours truly
I tip my chapeau to you, sir!
you are tough and kind. as a race we are really quite stupid. Knucles being the exception
this is getting downright obscene....are u in love?
No, can't say that we are.
Not that there would be anything wrong with that!
Thank you, and I return the compliment.
As to our reflection on our race, I must sadly concur.
we can always drink to it, and then look for the next fight bro...........for all of the nasty remarks i think in a lot of ways you probbaly kept Leo going........life is strange but whatever.
you want seperate tables? if yu see the French pussy you will forget about Leo pretty quick. i doubt Leo argues that point.
this is late night tv, right.
i want to be part of somethng too, you know. i sure wish Orly would come back.
Leo, Happy Easter to you too!
political expediency is not partisan. It's so common in the U.S. it's become the norm.
It's a simple recipe; Americans sense of entitlement towards cheap gasoline and and endless chain of politicians pandering to it. There has never been any substance to any of these "fact finding" excercises.
I think ZH readers can conceive of some point in the future when commodity rationing measures will actually bite.
Happy Easter Bruce.
I guess in Greek is Kalo pascha.
Leo, what about the idea that million dollar funds must place that money somewhere.
If they buy treasuries they loose, cash they loose, stocks are going up somewhat but the risk is very high. Commodities are where the game is at the moment. Since so much money is in the pipeline.
Please analyze this for me.
"Partisan"?
So is it not possible to criticize the Obamessiah without doing so from a shallowly (and fundamentally meaningless) partisan angle?
I see no sign at all of any partisan angle in Bruce's well-deserved critique of the cynical and disingenuous attacks on "speculators" by The One.
LOL OF COURSE Leo loves Obummer
Dear akak:
Silly, you already know it's perfectly possible. And necessary.
(Double post --- this site REALLY has problems, even beyond Leo's presence!)
I was trying to be uncharacteristically generous and civil to Leo, instead of merely calling him the arrogant and ignorant asshole that he actually deserved.
...arrogant and ignorant asshole that he actually deserved.
Good try akak. Better luck next time ;)
Well, I only claimed to have been trying .....
+1
Oh gosh, don't be civil, just let it all out! You'll feel better and other commenters will feel empowered to say what they really mean. There is, after all, something to be said for hot talk in place of bloody action.
Well...since you did not ask....
I am going to make this easy for you....
If the following were not around....and the US reverted back to community banks where people actually know people.....where would commodities prices be....about 50% lower or even more....
Goldman Sachs
Citicorp
JP Morgan
Morgan Stanley
Deutsch Bank
These banks have pumped their customer base in the top 1% like there was no tomorrow...which may just be the case....
The commod markets need a permanent Jewish holiday....
The Top 1% thinks that its cute that more than half the world has been put in misery because of a few points above other pqper....
The top 1% need to jump on some other game....
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Nothing ever is perfect. What were some of the problems with community banks, please? And what was the population the last time we had community banks; that might make a huge difference, because even in a "small" town of today, fewer people "know" each other. Once there has to be a bus line or a commuter rail system, changes are few know anyone else. But I'm not saying it couldn't work. However, because it worked before under different circumstances it might not work the same way not. Would have to consider why it worked before, and how it could be made to work again. Anyone working on such a plan? How can anyone find our more?
We're not talking about a system that isn't perfect here, dizzyfingers. Let's get serious.
However they justify their miserable, pathetic existence, these banker-gangsters are driving the world down a dead end street, inebriated on free money, at 90 MPH.
This article is too intelligent for most of the public, though I'm certain the audience at zh understands it. A good article to highlight, copy, and send via innumerable fax copies to the white house and congress.
(Sorry I didn't capitalize where it's traditional to do so, but not yet against the law NOT to, and I like to exercise my rights of protest while I still can without too much risk!)
Thanks BK. Always appreciate facts expressed in ways that capture the ridiculousness of threats to our lives and livelihoods...even when not very serious, which I believe is not the case here, since I recognize and understand the seriousness of living in a region of the Us 5,000 gallons of winter heating oil is a necessity of life...by our out-of-control government and the poseurs, clowns, idiots, and sociopaths its power attracts. Those in gov who read this and object, list to me. If the shoe fits....bite me.
replaced
Since the evil naked short sellers brought down LBros. in 08, these evil oil speculators must be working to bring down the entire economy.
What do you think Bruce, are Obama and the boys telegraphing the knockout punch for the equity markets?
What a fascinating and intriguing question. But is that too intelligent a possibility for govmint varmints? Or simply too big an endeavor? Without collusion? Could that kind of collusion be possible?
Dizzy,
The reference to the "boys" includes govmint and banksta varmints. At this point in the game I think the collusion question has been answered. The POMO/Auction merry-go-round scheme has worked well for the ones involved. Not so much for everyone else.
As we come closer to the next QE announcement, the headfake is not whether they announce QE3 or not but if they are being impacted by the best understood economic law - "Law of diminishing returns". Does it apply or is it just another BS application used to fatten the college textbooks?
If they are getting seriously diminished returns from their current operations then picking a scapegoat is the easiest way to go.
Thank you Trianus A. I think all collusion "questions" are answered. I'm simply one of the public, don't really know much but have been studying hard at zh university.
So QE infinitum is a given, hm?
Skipping over that because in the end QE infinitum probably won't matter much because the endgame has to play out no matter how bad things get in order for what must happen to happen so that everyone can learn whatever lessons there are to learn. Frightening thought, because I'm pretty sure that this debacle grew directly out of S&L and its subsequent lack of any punitive action by any controlling legal authority (and that was before Clinton!!!) and now look where we are not so very many years later. Note also that elections solved nothing; things simply got worse and worse.
.So I guess what that means is that we (the US) are going to sink to the lowest possible economic point that's possible while the banksta varmints slowly recognize that they're no longer winning but will have become losers like the rest of us? That makes me want to puke for the rest of us, but I love the idea of banksta varmints experiencing seriously diminishing returns, and maybe some commupance. At that point, scapegoatism may be too late; the US may be in full revolution, with REALLY no controlling legal authority, if it isn't already happening without our realizing it. If not, I feel we're approaching a tipping point, a dangerous angle of repose that won't allow stepping back from the brink.
Aren't the banksta varmints international? And aren't they getting profits from overseas, in the developing countries that seem to be growing nicely? Commupance? They will flick it off as a small annoyance and keep on keepin on.
If rates go up, the deficit goes up even more and more money will be needed to be printed causing inflation.
All the roads lead to inflation.
Dear Sudden:
Does open, "honest" default lead to inflation?
You bet it does.
You know how money is created?
All roads lead to the conclusion that the system is insolvent and only a recognition of the bad debts will allow us to move forward.
Of course, this must be delayed until after the next election for the sake of the political system...
Pray hard, pray very hard for the recognition of the bad debts!
Seems so simple, but probably impossible until the dreary endgame runs its course.
Recognizing, formulating a fix, and implementing it is way too intelligent for this country.
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