Money Masters

[JohnRoberts]

"Painfully slow"? There's still no way to contain a spill in reasonable time. How short-sighted can one be?

It has only been a year, but a lot has changed inside in the industry since then. A blowout of that nature is best prevented, but they have also made plans for industry wide efforts (Just like we need a world wide nuclear industry accident response team).

The unfinished business in my mind, is the blow out preventer, that appears to have been inadequately designed to reliably shear the well head pipe and contain the well. I expect the preventer firm will get their day in court and a very expensive public flogging, but hopefully, oil industry engineers have already adjusted their designs.

A casual read of history suggests the BP well problem was the combination of multiple factors. A poor safety culture, a rushed and incorrectly tested cement job, and finally the insufficient blowout preventer. While it was a bad accident, the upside is it revealed the flawed blowout preventer and bad execution of drilling, so future wells will be safer.

Speaking of that accident the area still hasn't recovered fully economically (just down the road from me). More than a little because of the administration's response after the accident, not the accident itself.  

And yes, speculation plays a vital role in the prices of all commodities. At least over here in reality-land.

Are we disagreeing here?

Yes, speculation on future prices, as influenced by "anticipated" supply and demand is a valuable and useful signal to free markets that we need to invest more in oil exploration. Blaming the speculators for the rising prices is shooting the messenger for the message they carry. The recent high profile arrest, was a commodity trader manipulating NG prices. "manipulating" (like what the OPEC cartel does by withholding supply) is clearly illegal. Speculating about future market prices is healthy to help mitigate a bad future without enough oil, by steering capital investment that way right now. We have a bunch of oil now, because of the still soft economy, the speculation is that we won't have enough in the future because of our behavior now.

Conservative (former?) hero and Rand disciple Greenspan was the one who thought a weak dollar wasn't a problem at all. This is what you get when you stop producing goods and base an economy on the 'virtual' financial "industry". The dollar has gone down long, long before QE was even at the horizon.

We've spoken about relative currency values before and their influence on exports (I just invested in a German ETF because of their relative currency advantage, and it pays a 4% dividend while I hedge against the dollar. Gold doesn't pay a dividend).  

Greenspan, who calls himself a libertarian does not walk the walk. He has been pretty much discredited for his failure to raise interest rates soon enough to prevent the dot com bubble and helped rev up the housing bubble.  It is the nature of free markets to experience bubbles from time to time, but the marginal reserve banking system creates a positive bias to economic activity that is even more conducive to bubbles. At the moment, all the liquidity that Bernanke has created with good intentions, is already causing the next bubble (commodities). Does anybody think gold is really worth $1500 oz, or silver, or cotton, or....?  We are very slowly getting smarter (about monetary policy), but I fear we aren't there yet.

Voters are paying attention, and you're not going to like it. Anti-democratic, big government actions in the mid-west, blatant corporatism and cronyism, reckless redistribution from the bottom to the top, infringement efforts on voter registration accross the GOP governed states, all the attacks on the social safety net may very well create an epic backlash. And not a single candidate with good prospects in sight for the Republicans presedential ticket.

I won't argue about the future, since that can't be proved one way or the other, until it is no longer the future. Polls of independent swing voters who carried Obama into office, have regained their sense after watching him in action and turned against him. But there is still a long time to go between now and the election, so a lot can happen. Despite the governments best (worst?) efforts the economy is slowly recovering, and if unemployment gets down another few points by late 2012, the sitting incumbent always has an advantage. Not to mention $1B worth of campaign spending plans.

I suspect any smart republicans are waiting for 2016, and Obama will probably see a challenge from his left, with his recent dance to the center, trying to win back the independents. But we have an old saying here... "fool me once shame on you. Fool me twice, shame on me. "  It should be an another interesting election, and I would be happy just to get the senate back.  

Of course, Obama has moved so far to the right on many issues that it often doesn't matter. But looking at the sheer abyss on the other side, he'll win the election easily, I think.

I plan to vote the same way next time. I don't believe his "move" to the center is anything more than campaign posturing, but it could work for him if the economy recovers enough by election time that his approval rating recovers.  Lots of time between now and then, so anything could happen.

JR

Note: the US government is actually paying out more in entitlements than it took in in tax receipts. http://www.examiner.com/finance-examiner-in-national/welfare-and-benefits-now-surpass-all-tax-revenues-taken-by-the-government
Of course some people think this means we need to increase taxes. I think we need to get spending under control.

 

[JohnRoberts]

. . . . infringement efforts on voter registration accross the GOP governed states, all the attacks on the social safety net may very well create an epic backlash.  

What about the virtual theft of the 2000 election?   I don't feel there was enough voter backlash over that debacle.  That we've somehow let that slide sets precedence as did the near impeachment of Clinton over a civil suit.  Symbol of American strength and perseverance or weakness?

It seems we need a backlash on some level to really move in a different direction.  IMO the election of Obama represented more of an emotional reaction than a rational one. And now he has appeared to move towards the sway of the bigger powers at large.

Maybe this story represents political maneuvering of some sort vs a real possibility but I've no reason to believe it's not what corporate power really seeks.  Novant has affected a large scale takeover of many small hospitals and doctors offices because the hospitals had managed to get themselves in some state of desperate financial crisis.  

http://www.rawstory.com/rawreplay/2011/03/michigan-budget-would-let-republicans-dis-incorporate-whole-cities-dismiss-elected-officials/  

Ah it begins (class warfare)...  The electoral college, and it's ability to make close elections appear not close, is IMO a good think to reduce controversy and promote peaceful transitions between elected administrations. 

If you are serious about vote fraud the lest few contests in MN smelled a little funny, and now apparently gerrymandering in NJ being publicly discussed.

I think it''s embarrassing (to me) how few people actually vote here... maybe that will change too. 

JR

 

[living sounds]

I think it''s embarrassing (to me) how few people actually vote here... maybe that will change too.  

JR

Republicans are hard at work to keep it that way, by passing legislation in many states to make it a lot tougher to register new voters (which almost always translates into net gains for the Democrats). I also think it's scandalous on what grounds many people are not allowed to vote in the US.


As for class warfare, that has begun more than 30 years ago, and now the pendulum is slowly starting to swing back. The next generation with the help of the internet has a much better view at what the rest of the world is doing, and personal experience of the emergency of the situation will do the rest. People have long been compensating with credit for their loss in real income, and now that the time of easy credit is over realisation is slowly coming.

What is really meant by "government is the problem" is, of course, "democracy is the problem", since the government is just the representation of everyone, as opposed to a small minority in control of most resources. People are catching up to this, the tide is turning and statistics show it.

At the moment, all the liquidity that Bernanke has created with good intentions, is already causing the next bubble (commodities). Does anybody think gold is really worth $1500 oz, or silver, or cotton, or....?  We are very slowly getting smarter (about monetary policy), but I fear we aren't there yet.

Ah, so it is speculation after all? It would be smarter to regulate commodities again to bring back the stability of the long post war era. And make sure to heavily invest in alternatives to finite commodities like oil.

 

[lassoharp]

As for class warfare, that has begun more than 30 years ago, and now the pendulum is slowly starting to swing back. The next generation with the help of the internet has a much better view at what the rest of the world is doing, and personal experience of the emergency of the situation will do the rest.
What is really meant by "government is the problem" is, of course, "democracy is the problem", since the government is just the representation of everyone, as opposed to a small minority in control of most resources. People are catching up to this, the tide is turning and statistics show it.

I so very much hope that this is true.  People are getting "smarter" by seeing more and the web gives easy access.  But after watching what went on in the 2008 election "smarter voters" seemed to fly right out the window.  I saw too many otherwise intelligent well informed people get swept away in a storm of emotions - screaming "Socialism!"  the way McCarthy rabble roused against "Communists" some 50 years ago.  Not to mention some of the more absurd accusations directed at Obama.  I think it proves just how quickly and forcefully public perception can be manipulated in spite of the better informed information that's out there, and both parties obviously bank on the power of public perception. We need more exposes and good journalists that direct readers toward realism without pulling too many emotional strings.

 

[JohnRoberts]

I think it''s embarrassing (to me) how few people actually vote here... maybe that will change too.  

JR

Republicans are hard at work to keep it that way, by passing legislation in many states to make it a lot tougher to register new voters (which almost always translates into net gains for the Democrats). I also think it's scandalous on what grounds many people are not allowed to vote in the US.

I don't think dead people should vote... It is a given demographic trend that many new voters will favor democrats. I'm OK with them voting their personal self interest, but after they become legal citizens. Surely you appreciate the need to control immigration. We can't just reward all these people who stole into our country illegally, and expect more not to do the same. (simple economics 101. If you reward a behavior you get more of it).

As for class warfare, that has begun more than 30 years ago, and now the pendulum is slowly starting to swing back. The next generation with the help of the internet has a much better view at what the rest of the world is doing, and personal experience of the emergency of the situation will do the rest. People have long been compensating with credit for their loss in real income, and now that the time of easy credit is over realisation is slowly coming.

I too am optimistic about the value of the internet to disseminate information and view points, and that the younger generation will be smarter than us. I have been impressed by many young people I meet, but they are not the ones in the street throwing bricks through bank windows.

I also remember how naive and innocent I was when young. It is the natural condition that most out grow.

What is really meant by "government is the problem" is, of course, "democracy is the problem", since the government is just the representation of everyone, as opposed to a small minority in control of most resources. People are catching up to this, the tide is turning and statistics show it.

We are not a democracy. A lynch mob is a simple democracy.

Putting the government in control of resources will not result in best use. The failing of central planning are well documented, but not well understood or agreed about by partisan groups intent on controlling the private economy. 

At the moment, all the liquidity that Bernanke has created with good intentions, is already causing the next bubble (commodities). Does anybody think gold is really worth $1500 oz, or silver, or cotton, or....?  We are very slowly getting smarter (about monetary policy), but I fear we aren't there yet.

Ah, so it is speculation after all? It would be smarter to regulate commodities again to bring back the stability of the long post war era. And make sure to heavily invest in alternatives to finite commodities like oil.

Huh?? Regulation? Central planning doesn't work... let free markets decide what to do with commodities, if you want most effective utilization. I for one don't long for the kind of stability and growth they enjoy in Cuba.

As i have alluded to, the current administration energy policy is contributing to the high price of oil. This is in fact rewarding their hand picked, green energy winners (electric car companies, wind farms, etc). If the long term economics of this does not pay off, it will wither and die, since the government can not prop this up forever.

I find that I can't stomach Letterman much any more since he turned so partisan, but the other night while flipping through channels he had some green energy advocate on his dais, so i paused to hear the spiel du jour. Letterman, with a straight face, asked this guy why hasn't some other country invested in the new energy technology so they could get all the great new high paying jobs, and would end up ruling the world with their dominant economic advantage (good question  : ). The green energy advocate had a strained look on his face as he searched for an answer, and they broke for commercial.

I fear once again we must agree to disagree... There is a limited place for government and regulation. IMO we do not need more, but better from both.

JR

 

[living sounds]

I don't think dead people should vote... It is a given demographic trend that many new voters will favor democrats. I'm OK with them voting their personal self interest, but after they become legal citizens. Surely you appreciate the need to control immigration. We can't just reward all these people who stole into our country illegally, and expect more not to do the same. (simple economics 101. If you reward a behavior you get more of it).

Immigrants are not the only group not allowed to vote, it makes sense that only citizens can vote in a general election IMO. But there's zero justification to strip essential democratic rights just because someone got caught with a few grams of marijuana, for example. Historically the right in the US has long held an advantage at elections because of many measures preventing certain people from voting, and it's not great even today. And boy do they try, the town in Michigan where a private overseer has just replaced the democratically elected administration (and will now help build a golf course on the terrain of a public park for his buddies) is just one obvious example.

I have been impressed by many young people I meet, but they are not the ones in the street throwing bricks through bank windows.

How many are doing that? Absurd.

Putting the government in control of resources will not result in best use. The failing of central planning are well documented, but not well understood or agreed about by partisan groups intent on controlling the private economy. 

Huh?? Regulation? Central planning doesn't work... let free markets decide what to do with commodities, if you want most effective utilization. I for one don't long for the kind of stability and growth they enjoy in Cuba.

That fallacy is called "False Dichotomy":

"Arbitrarily reducing a set of many possibilities to only two. For example, evolution is not possible, therefore we must have been created (assumes these are the only two possibilities). This fallacy can also be used to oversimplify a continuum of variation to two black and white choices. For example, science and pseudoscience are not two discrete entities, but rather the methods and claims of all those who attempt to explain reality fall along a continuum from one extreme to the other."
http://www.theskepticsguide.org/resources/logicalfallacies.aspx


There's not just "free market" or "socialism". This is not about "central planning" but RULES that guide the free market. It worked very well for many, many years. It still does mostly, minus the (huge) problems caused by deregulation in the last 30 years.

 

[JohnRoberts]

I don't think dead people should vote... It is a given demographic trend that many new voters will favor democrats. I'm OK with them voting their personal self interest, but after they become legal citizens. Surely you appreciate the need to control immigration. We can't just reward all these people who stole into our country illegally, and expect more not to do the same. (simple economics 101. If you reward a behavior you get more of it).

Immigrants are not the only group not allowed to vote,

"illegal" immigrants only, Naturalized immigrants become full citizens... it is our way and our strength... many countries do not embrace (lawful) immigrants like we do.

it makes sense that only citizens can vote in a general election IMO. But there's zero justification to strip essential democratic rights just because someone got caught with a few grams of marijuana, for example.

Yup, bad example... but laws are slowly changing... for the other side of that coin, a recent ruling in MA http://www.talkleft.com/story/2011/4/19/205944/640

Historically the right in the US has long held an advantage at elections because of many measures preventing certain people from voting, and it's not great even today. And boy do they try, the town in Michigan where a private overseer has just replaced the democratically elected administration (and will now help build a golf course on the terrain of a public park for his buddies) is just one obvious example.

You are making me feel bad about being "right" of you...    almost.

There are many reports of partisan abuse from both sides, some that the sides don't even consider abuse.

Right now the administration is joining a union lawsuit against Boeing corp because they want to build airplanes in SC a right to work state. I guess Boeing is an evil employer. I'd rather see more new jobs in SC than in Mexico, or China. I have to wonder if Unions haven't outlived their utility. Do the workers who build planes in the US really need protection from the man?

The unions look at this as a zero sum game, but if they increase Boeing's cost, they sell less planes and need less workers, so they hurt the workers they are supposed to help. It seems clear from the outside, that unions are all about helping the unions.

I have been impressed by many young people I meet, but they are not the ones in the street throwing bricks through bank windows.

How many are doing that? Absurd.

The ones on TV...  I am saying my experience with young people I meet, is not the brick throwers.

Putting the government in control of resources will not result in best use. The failing of central planning are well documented, but not well understood or agreed about by partisan groups intent on controlling the private economy. 

Huh?? Regulation? Central planning doesn't work... let free markets decide what to do with commodities, if you want most effective utilization. I for one don't long for the kind of stability and growth they enjoy in Cuba.

That fallacy is called "False Dichotomy":

"Arbitrarily reducing a set of many possibilities to only two. For example, evolution is not possible, therefore we must have been created (assumes these are the only two possibilities). This fallacy can also be used to oversimplify a continuum of variation to two black and white choices. For example, science and pseudoscience are not two discrete entities, but rather the methods and claims of all those who attempt to explain reality fall along a continuum from one extreme to the other."
http://www.theskepticsguide.org/resources/logicalfallacies.aspx


There's not just "free market" or "socialism". This is not about "central planning" but RULES that guide the free market. It worked very well for many, many years. It still does mostly, minus the (huge) problems caused by deregulation in the last 30 years.

Nice try... I didn't reduce the argument to only two choices, and I am not the one constantly calling for regulation to manage scarce resource allocation. I don't believe some government puke is smarter than the invisible hand of free markets to make all the decisions needed, 

I do not cite Cuba as proof, just an absurd example of riding that horse into the ditch, I could have just as easily listed other countries (Venezuela anyone?)...  I have referred this group in prior discussions to the writings of Hayek whose "The road to serfdom" has made the arguments against government control of the private economy far more clearly and elegantly than I ever could.

almost time for another bier.

JR

 

[living sounds]

Yup, bad example... but laws are slowly changing... for the other side of that coin, a recent ruling in MA http://www.talkleft.com/story/2011/4/19/205944/640

I haven't read the ruling, but IF the substance in question is not illegal there is no need to search for it. Now, since it's clearly illegal to drive under the influence of MJ, the police should of course be able to perform a drug test on site if there is any reasonable suspicion that the DRIVER is intoxicated. Still somewhat problematic, since blood serum levels don't necessary reflect acute intoxication. I guess that's one of the reasons so many governments struggle to take a more liberal approach to the drug, since it's so difficult to draw a line...

Right now the administration is joining a union lawsuit against Boeing corp because they want to build airplanes in SC a right to work state. I guess Boeing is an evil employer. I'd rather see more new jobs in SC than in Mexico, or China. I have to wonder if Unions haven't outlived their utility. Do the workers who build planes in the US really need protection from the man?

The unions look at this as a zero sum game, but if they increase Boeing's cost, they sell less planes and need less workers, so they hurt the workers they are supposed to help. It seems clear from the outside, that unions are all about helping the unions.

From my central European point of view a lot of things in the US are very strange. The whole partisan divide especially, with both sides fighting stubbornly for extreme positions. People often seem not to be able to internalize limitations and arrive at a reasonable position themselves, instead everything needs to play itself out in a grand theater of partisan fighting. But the whole system is set up for this, I guess. The whole idea of "checks and balances" taken too far is not only inefficient, but often produces spectacularly bad results. Good example: The US criminal justice system. Judges and prosecuters get elected by the general population, thus they are not impartial, but are often set up to convict someone instead of finding out the truth, since convicting lot's of 'criminals' is generally popular, and the kind of people voting in these elections especially tend to care for this. What you end up is a relatively high percentage of innocent people in prison.
Or the fact that a lawyer needs to win a (civil) case to earn any money at all. He'll only put any real work into a case he's pretty sure to win, and he'll probably do whatever it takes to win that case. Absurd.

If the incentives are wrong, the outcome is bad. This is often the case in the economy, too. The whole housing bubble desaster with all the CDOs and CDS-es etc. is a great example. The solution to these problems is to set up rules that only allow for reasonable incentives and thus arrive at reasonable outcomes. Not a priori necessarily, as this would stifle useful developments, too. And don't make everything a competition. Humans have evolved to be competative as well as cooperative, the combination of both is the most sucessful.

And since I'm already at it: Get rid of the Senate. Same number of senators for a huge state like Texas or California and Vermont or Alaska? That's not representative democracy.

The ones on TV...   I am saying my experience with young people I meet, is not the brick throwers.

I've seen kids throwing molotov cocktails at banks in Berlin ten years ago on New Years eve. Thought it was a bloody stupid idea back then and think it's a bloody stupid idea now. They're a tiny minority. Once you get to violent extremists left and right meet at the other end of the circle.

Nice try... I didn't reduce the argument to only two choices, and I am not the one constantly calling for regulation to manage scarce resource allocation. I don't believe some government puke is smarter than the invisible hand of free markets to make all the decisions needed, 

I do not cite Cuba as proof, just an absurd example of riding that horse into the ditch, I could have just as easily listed other countries (Venezuela anyone?)...  I have referred this group in prior discussions to the writings of Hayek whose "The road to serfdom" has made the arguments against government control of the private economy far more clearly and elegantly than I ever could.

almost time for another bier.

JR

Just put the regulations that worked very well for more than 50 years back in place. That's nothing extreme, just reasonable I think. I don't want to pay a tax on gas, chocolate or bread to greedy speculators. We've seen the results of deregulation in this area, and should have the courage to revise bad policy.

 

[JohnRoberts]

From my central European point of view a lot of things in the US are very strange. The whole partisan divide especially, with both sides fighting stubbornly for extreme positions. People often seem not to be able to internalize limitations and arrive at a reasonable position themselves, instead everything needs to play itself out in a grand theater of partisan fighting. But the whole system is set up for this, I guess. The whole idea of "checks and balances" taken too far is not only inefficient, but often produces spectacularly bad results.

My sense of the intent of the framers of our constitution and government was for it to intentionally be inefficient. They didn't want it to be easy to generate reams and reams of legislation and regulation. But the legislators don't let that stop them... The Dodd/frank legislations, didn't even bother to define the new rules in the legislation, so the business community is still waiting to see what all the new regulations will be.  Not so hard to see why business might be dragging their feet, waiting for some regulatory clarity.

Good example: The US criminal justice system. Judges and prosecuters get elected by the general population, thus they are not impartial, but are often set up to convict someone instead of finding out the truth, since convicting lot's of 'criminals' is generally popular, and the kind of people voting in these elections especially tend to care for this. What you end up is a relatively high percentage of innocent people in prison.

Do you listen to yourself?  Convicting innocent people IS NOT POPULAR.

Or the fact that a lawyer needs to win a (civil) case to earn any money at all. He'll only put any real work into a case he's pretty sure to win, and he'll probably do whatever it takes to win that case. Absurd.

Every time I have ever hired a lawyer, I paid them win or lose...

One thing I don't like about our legal system is that losers don't have to automatically pay winners court costs, which encourages nuisance suits undertaken with low justification. 

If the incentives are wrong, the outcome is bad. This is often the case in the economy, too. The whole housing bubble desaster with all the CDOs and CDS-es etc. is a great example. The solution to these problems is to set up rules that only allow for reasonable incentives and thus arrive at reasonable outcomes. Not a priori necessarily, as this would stifle useful developments, too. And don't make everything a competition. Humans have evolved to be competative as well as cooperative, the combination of both is the most sucessful.

Some other countries, did not suffer the housing market distortions we did, the simple difference, they couldn't make no money down undocumented loans, because the banks that made the loans had skin the game, so they just didn't make stupid bad loans. Our government still believes they need to some how be in the middle of housing loans (guaranteeing mortgages).  The way to return sanity to the home loan market, is just make old fashioned home loans, where the buyer has to make a real down payment, and prove they can pay the loan...The bank needs to hold at least part of the mortgage so both sides have skin in the game...

The ability to package and resell mortgages, made the banks no longer responsible, or losers if the loans failed... no wonder they didn't care and wrote nonsense loans. 

And since I'm already at it: Get rid of the Senate. Same number of senators for a huge state like Texas or California and Vermont or Alaska? That's not representative democracy.

You are on a roll...  ;D...  Who ever said we were a representative democracy, or wanted to be?  I'll stick with the republic thank you.

Prior to the 17th amendment (1913) Senators were appointed by the state legislatures and only after 1913 were they elected by popular vote. I kind of like the old way with a little more power in the state legislatures, closer to the people and local issues, not some 'super representatives" directly responsible to the people.

The senators are supposed to be the thoughtful deliberative ones, that balance out the more volatile, public opinion oriented house.

I find our form of government quite good, but we need to finish flushing out some of the bad actors in office. And try to undo some recent damage.

Just put the regulations that worked very well for more than 50 years back in place. That's nothing extreme, just reasonable I think. I don't want to pay a tax on gas, chocolate or bread to greedy speculators. We've seen the results of deregulation in this area, and should have the courage to revise bad policy.

Like i said before better regulation and better governance, not more of both.

I consider the high tax on fuel in europe kind of "absurd", but I will not waste my energy criticizing things I can't change and don't really affect me. That said I don't understand why you tolerate it from your elected governments.

I should probably give up on trying to explain that speculators are only the symptom, and the real problem is bad energy policy, and too much money chasing finite fixed assets. Here is a graph of oil vs the US dollar, and as the dollar gets devalued, the price of oil goes up... go figure.  8)

JR

 

[living sounds]

I consider the high tax on fuel in europe kind of "absurd", but I will not waste my energy criticizing things I can't change and don't really affect me. That said I don't understand why you tolerate it from your elected governments.

True, I got carried away there.

As for the energy prices, they're higher in Germany than in even most other countries, and this has led to the industry being the most energy-efficient anywhere, as well as constant innovation in energy efficiency of the products they produce. So while individually I don't like paying high gas prices or electricity prices, I also understand this leads to more innovation down the road, and the money is used to maintain infrastructure. Well, unless bad regulations distort things: Diesel is much cheaper at the pump, so innovation went into creating more convenient diesel motors, producing problematic exaust products etc., instead of better efficency over all. So it's really important to have smart people writing laws and regulations...

 

[JohnRoberts]

True, I got carried away there.

As for the energy prices, they're higher in Germany than in even most other countries, and this has led to the industry being the most energy-efficient anywhere, as well as constant innovation in energy efficiency of the products they produce. So while individually I don't like paying high gas prices or electricity prices, I also understand this leads to more innovation down the road, and the money is used to maintain infrastructure. Well, unless bad regulations distort things: Diesel is much cheaper at the pump, so innovation went into creating more convenient diesel motors, producing problematic exaust products etc., instead of better efficency over all. So it's really important to have smart people writing laws and regulations...

Sorry the fuel tax was a cheap shot, but there is a deeper philosophical point behind that reference. Do we view government as an all knowing parent, who we trust to make personal choices for us in our best interest, or a referee to make sure all the players on our common economic playing field compete fairly, as we make decisions for ourselves?

The need to conserve energy because it's expensive, is a bit of a self-fulfilling prophecy when it is made expensive by government taxes, or policy, or both. The need to conserve energy because we are running out, has been incorrectly prophesied numerous times in the past, and we keep finding more.

The whole "carbon is bad" screed because we are heating up the planet, is a relatively new argument, to justify the same old government desire to control things they shouldn't (IMO).

I do not want to reargue these specific issues, just raise the philosophical point that I think the highest purpose of government is to protect our individual freedoms, as a wise referee, not a smothering nanny.

JR

 

[living sounds]

Thanks to Sen. Bernie Sanders we now know what some of the banks really did with the money they received in order to save the economy:

http://www.marketwatch.com/story/banks-got-direct-corporate-welfare-study-says-2011-04-26?reflink=MW_news_stmp

 

[mouse]

anyone follow max keiser?

http://www.youtube.com/watch?v=M_RBbeIFeT8&feature=player_embedded

 

[JohnRoberts]

I'm shocked....  

I always get my business news from the only self declared socialist in congress.  ;D

Old news, but worse yet the big banks are still at the government teat today years after Lehman fell with interest rates held too low for too long. They are recapitalizing off the carry trade on overnight window interest rates.

=======

I apologize for repeating myself but I keep hearing all this arm waving about how speculators are responsible for high gas prices from the partisan spin meisters.

These "speculators" are buying contracts for future delivery of oil. The only way they make a profit, is if the cost of oil keeps going up and they sell those contracts for more later. If the price of oil stays the same or goes down, they lose money, simple math. It can't keep going up forever, so eventually the last guys buying in, when the music stops will lose. While the fundamentals may not support $110 oil, they do not make a strong argument for much less than $80, so this fear trade price peak will end and last-in speculators will lose their shirt, like they did after $150 oil passed into history.

If we want the future price of oil to be lower, so gas today can be cheaper, we need to take positive action today so there will be more oil (drilling) in the future, or use a lot less oil (perhaps a european style federal tax on gas).

So far I don't see either happening, but i sure wouldn't buy oil as an investment today with it this high, unless I "knew" the administration was actually OK with high oil prices, perhaps because it helps their alternative energy "green" investments. It seems truly self destructive for the administration to support high oil prices, since the resulting weaker economy is probably the largest issue for next years election, but so much of their actual behavior is inexplicable for any other reason.  

Right now the blame game is in full swing, ignore the man behind the curtain. Do the math, this isn't rocket science.

JR

 

[living sounds]

These "speculators" are buying contracts for future delivery of oil. The only way they make a profit, is if the cost of oil keeps going up and they sell those contracts for more later. If the price of oil stays the same or goes down, they lose money, simple math. It can't keep going up forever, so eventually the last guys buying in, when the music stops will lose. While the fundamentals may not support $110 oil, they do not make a strong argument for much less than $80, so this fear trade price peak will end and last-in speculators will lose their shirt, like they did after $150 oil passed into history.

But what if these speculators are private wealth funds of oil exporting nations? They make huge profits selling oil for a lot more, even if they loose some money eventually longselling futures. And the investment banks brokering the deals make money regardless. I don't know about today, but in 2008 a lot of institututional investors put their money into commodities, and lost a lot. More money transffered from people's pensions to wealthy individuals...

BTW, even John Boehner is now asking to cut oil subsidies...

 

[JohnRoberts]

These "speculators" are buying contracts for future delivery of oil. The only way they make a profit, is if the cost of oil keeps going up and they sell those contracts for more later. If the price of oil stays the same or goes down, they lose money, simple math. It can't keep going up forever, so eventually the last guys buying in, when the music stops will lose. While the fundamentals may not support $110 oil, they do not make a strong argument for much less than $80, so this fear trade price peak will end and last-in speculators will lose their shirt, like they did after $150 oil passed into history.

But what if these speculators are private wealth funds of oil exporting nations? They make huge profits selling oil for a lot more, even if they loose some money eventually longselling futures. And the investment banks brokering the deals make money regardless. I don't know about today, but in 2008 a lot of institututional investors put their money into commodities, and lost a lot. More money transffered from people's pensions to wealthy individuals...

BTW, even John Boehner is now asking to cut oil subsidies...

It is interesting to hear people dissect American politics from such great distance... Boehner is already pedaling as fast as he can to walk back that olive branch he offered to the Democrats, to look at oil industry tax policy, that they decided to hang around his neck like the ancient mariner's albatross.  ;D

Low cost energy has been a good thing for our economy for a long time. A less constructive energy policy that does not support the oil companies exploration and drilling, will cost us jobs directly and indirectly.

Oil companies need to pay their fair share of taxes just like every other large company. I don't doubt that they have engineered favorable tax breaks just like every other industry with hundreds of millions to spread around in DC, to grease the wheels of government tax policy.

A new cleaner tax code with less tax breaks for "all" the big dogs, could lower rates for the many small companies who actually pay statutory rates and create a lot of new jobs. 

----------

Regarding oil exporter's sovereign wealth funds bidding up the price of oil, to make their oil sales worth more. is a little like standing on the deck of a sail boat and blowing at the sail to move the boat... they're not going to move the needle much, and it is very hard for them to justify paying top dollar list price for their own oil, that cost them $20 or less to pump... That math doesn't work for me. Much simpler for them to use the tried and true old school cartel behavior of simply withholding supply and letting other people bid up the price. Most of the money I've seen invested by middle east sovereign wealth funds, and been into non-oil industry assets to prepare them for a post oil wealth future.

Recent commodity speculation spin is about offshore investment funds that are not registered with the CFTC buying oil and gold and the like, but this is not evidence of manipulation, just speculators (who could be institutional investors)  betting on the momentum trade, that oil and gold will keep going up in the near term. So far that bet has been profitable so it's hard to fault them, but nothing goes all the way up to the sky, so this too will end eventually, and all those investors will find them selves on the losing side of that bet. If they are nimble and can unwind their positions before the dumb/slow money figures it out, they could still live to bet another day.

It may take a conservative administration to turn this oil situation (marginal supply) around, so the long oil trade could be profitable for some time longer.  Too scary for me...

JR

 

[JohnRoberts]

For those who may not be paying attention, the most recent commodity bubble, inflated by all the monetary excess chasing finite goods, has been silver...  lately silver has been hotter than gold, and momentum upward attracted more and more speculation. The exchange regulators did their job and raised margin requirements.. pssssss the sound of a bubble deflating.

Watch out below... But until they sop up all the money chasing too few goods, this bubble activity will move around to other commodities or asset classes.

The price of oil barely budged on OBL news, but I am waiting for some clarity about game plan for Libya... that appears to be the marginal supplier and source of risk premium these days.  

JR

edit/ my point in case this isn't suitably clear, ask those speculators who bought at the top how profitable it was for them?  /edit

 

[living sounds]

I see the fact that pension funds are even allowed to invest in commodities as (part of) the problem. They were prevented from doing that for most of the 20th century, for very good reasons.

 

[JohnRoberts]

I see the fact that pension funds are even allowed to invest in commodities as (part of) the problem. They were prevented from doing that for most of the 20th century, for very good reasons.

More rulz...

Pension funds are not the bad guys here.. they are just chasing return like the rest of the world, in a period where central banks are holding interest rates artificially low and playing other games with the money supply.

George Soros was one of the rats scrambling from the the silver futures market, but he is a smart guy so surely didn't buy at the top... that was probably dumb slow money, like those pension funds trying to be like George, but late to the dance.

IMO the solution is more rational management of money supply. Make the fed stop trying to engineer painless economic cycles. We need to flush out the dead wood periodically, not bail all the weak sisters (GM, et al)  out.

We dug a pretty deep hole with the mortgage derivatives fueled housing bubble. All that wealth isn't coming back, and somebody needs to pay the piper. Inflating all those underwater mortgages to make them look like good loans, will steal real wealth from everybody else who didn't party down like it was 1999.

Of course I could be wrong, maybe the government is smarter than I think..  So far we're like that lobster in warm water and enjoying the hot bath.

JR

 

[living sounds]

They're not the bad guys, but they're the ones who will again need saving by the government when the investments go bad, adding more debt. Bring back the common sense rules, that's all I'm saying. It's actually nothing new:

http://en.wikipedia.org/wiki/Prudent_man_rule