Regulation? Hardly! Try Speculation!

Deep Speculation -- from Harper's Weekly 2/11/1865

Market manipulation describes a deliberate attempt to interfere with the free and fair operation of the market and create artificial, false or misleading appearances with respect to the price of, or market for, a security, commodity or currency. Market manipulation is prohibited in the United States under Section 9(a)(2) of the Securities Exchange Act of 1934...The Act defines market manipulation as transactions which create an artificial price or maintain an artificial price for a tradeable security. --- from Wikipedia

Advocates of free markets like to point out that government regulation strangles and upsets the equilibrium that laissez-faire capitalism provides and requires in order to maintain pricing that reflects the true value of goods and services. Libertarians are staunch believers of totally unfettered capitalism, although the majority of conservatives are its primary cheerleaders also. Or so it seems.

Certainly all the saber-rattling from the United States, and Israel (the tail-that-wags-the-dog), against Iran is having an unnerving affect on the oil commodity markets around the world. Add to this the declining value of the U.S. Dollar, which dominates and is linked to the value of each barrel of crude, and not to mention manipulation by unscrupulous producers that invokes shortages and drives prices upward. Of course, as would be expected, Republicans are jumping on the bandwagon and are more than happy to blame this on the Obama Administration. But there are definitely other factors involved -- factors that have had a long-term influence on steadily rising gasoline prices over the last few years. These are factors that are unrelated to consumer demand, since demand is currently at its lowest mark in the United States since 1997.

Many people are only vaguely aware that oil prices are set by commodities traders -- speculators -- who buy and sell futures contracts on the world's commodities exchanges. These are agreements to buy or sell oil at a specific date in the future at a specific price. Buyers will use these to avoid the risks associated with the price fluctuations of oil, while sellers will attempt to lock in a price for their products. As with all financial markets, speculators use such contracts to gamble on price movements. Commodities traders can create a self-fulfilling prophecy by bidding up oil futures prices (or bidding down, selling short, and still getting rewarded handsomely). This practice adds up to 30% to the cost of a barrel of oil without adding any value to the barrel. Once this starts, it can create an asset bubble. (Sound familiar?) Unfortunately, the one who pays for this bubble -- the artificially-created pricing -- is the consumer. That's you...and that's me!

The other night Cenk Uygur of The Young Turks had a segment on his nightly cable television show about the fluctuating pricing of oil and gasoline, which raised a ton of questions (and answered a ton more) about how speculators in oil have been able to manipulate market pricing to the detriment of us all. Here's the reason for it all: In 2004, commodity investment in oil speculation was a hefty $13 billion. By 2009, only five years later, that investment skyrocketed to $300 billion! Coincidentally, or not, in July of 2004 the market price for crude oil was around $31/barrel; by July of 2008 the price escalated to over $137/barrel. In the United States, that translated to $1.93/gallon (in 2004) and $4.09 (in 2008) at the pump. Granted, pricing dropped after those high-marks, but have since steadily increased and now approach those record levels -- with higher levels expected as we move deeper into the year.

"The cost of gas is expected to rise this spring and summer — but no matter how hard conservative pundits try to blame a potential threat of an oil cutoff from Iran, it’s just not the whole story. Speculation on oil futures — by big banks such as Golden Sachs, JP Morgan Chase and others — contributes to the rising cost. 'They make money if the price zooms up,' Cenk says. In 2011, the average American household paid $600 more out of pocket as a result of that speculation. 'It isn’t supply and demand. It isn’t the free market. It’s because these guys are playing with the market — so that they can make more money. They have got to love what is happening with Iran.' "

As Uyger points out, last year each family in America paid an extra $600 in fuel costs due to oil speculation -- an extra $600 that isn't related to supply and demand market forces or because of free-market competition. It was, pure and simple, just another example of how monopolistic capitalism manipulates market pricing, creating bubbles of artificially high pricing for the benefit of a few and to the detriment of the many. It is, by no other definition, market manipulation -- despite the Dodd-Frank Bill passed by the Democratic Congress that was supposedly designed to limit such abuses.

Here's an older video from last year, again by Cenk Uygur, that explains this subject even more thoroughly. It's happening again.  

 

The Slippery Slope Turned to Black Ice

He did it! On the last day of the year, during a holiday weekend when most people aren't paying attention to the news, President Obama signed the egregious National Defense Authorization Act (NDAA) into law. Congratulations sir! You just set us on course for complete dictatorial control! From Anonymous earlier this month:

"If you have not yet woken up to the reality of the police state we've been warning you about, I hope you realize we are fast running out of time. Once this becomes law, you have no rights whatsoever in America. — no due process, no First Amendment speech rights, no right to remain silent, nothing."

So we'll begin 2012 under a completely new legal authority; not the rule of law as based upon our constitutional protections, but rather the murky and ambiguous sense of justice that the president -- any president -- feels like asserting on any given day.  

We live in strange and dangerous times. May the new year's promise of peace, and increased awareness and raised consciousness, be with all of you and those you hold dear. 

Iraq, Afghanistan, and Civil Disobedience

Speaker: Chris Hedges

"Law never made men a whit more just; and by means of their respect for it, even the well-disposed are daily made the agents of injustice.  A common and natural result of an undue respect for law is that you may see a file of soldiers, colonel, captain, corporal, privates, powder-monkeys, and all marching in admirable order over hill and dale to the wars, against their wills, ay, against their common sense and consciences, which makes it very steep marching indeed, and produces a palpitation of the heart.  They have no doubt that it is a damnable business in which they are concerned; they are all peaceably inclined.  Now, what are they?  Men at all? or small movable forts and magazines, at the service of some unscrupulous man in power?  The mass of men serve the State thus, not as men mainly, but as machines, with their bodies.... In most cases there is no free exercise whatever of the judgment or of the moral sense; but they put themselves on a level with wood and earth and stones; and wooden men can perhaps be manufactured that will serve the purpose as well."  ~Henry David Thoreau, On the Duty of Civil Disobedience

As Chris Hedges proclaimed last December when he committed to participate in nonviolent civil disobedience by refusing to obey civil laws in a last ditch effort to induce change in governmental policy concerning the on-going wars and occupations of both Iraq and Afghanistan, "it's all we have left". As war -- perpetual and on-going war -- has become the norm in American society, it is neither criticized or rebuked by either faction of our two-party dictatorship. It's all that remains of hope for an end to the carnage, an end to the depravity of conflict inflicted not only on those we occupy, but also the psyche and ever-increasing percentage of our treasure that goes to training our young men and women in the trades of slaughter. Truly, as Gandhi wrote in Non-violence in Peace and War, "Liberty and democracy become unholy when their hands are dyed red with innocent blood." 

In Washington D.C., yesterday's demonstration and observance of civil disobedience was seen and cheered by hundreds behind police-erected barricades, as over one-hundred activists, including Daniel Ellsberg and members of ANSWER Coalition, March Forward!, Code Pink, and several veterans organizations, risked arrest in order to expose and shine light on the continuing war policies inherited and escalated by the Obama Administration. As many speakers before the march and ensuing civil resistance noted, just showing up for demonstrations doesn't sway our governmental leaders anymore. The exploitation, manipulation, and subjugation continues. As Ralph Nader reminded us, $700 million per day is spent to operate and support the war and occupations of Iraq and Afghanistan. $700 million per day! This would appear hypocritically obscene and profane if budget talks weren't fixated on austerity cuts that primarily contribute to the well-being and welfare of the less fortunate in American society, but that's not the case. Both wings of our colluding dual-party dictatorship, continually echoing the patriotic script of freedom and liberty, are embarking on taking everything away from the middle and working class people in this society and handing it all over to the wealthy, the elite and the powerful. Perpetual war is one means to achieving that end. Sadly, by not resisting, the American people are complicit in their own demise. Yesterday, over one-hundred resisters stood up for the American people.

Voltaire wrote that it is forbidden to kill; therefore all murderers are punished unless they kill in large numbers and to the sound of trumpets.  Chris Hedges, while at the podium yesterday, said war is organized sadism. Both men are right. Nations have borrowed billions for war, while no nation, to my knowledge, has ever borrowed largely for education. Undoubtedly, no nation is rich enough to pay for both war and the betterment of civilization (although Lyndon Johnson tried). We must make a choice, and apparently that choice has already been made. We are seeing that now.