Thursday, June 05, 2008

Maybe not all but quite a few roads lead to Goldmans - redux

Cheers to anon who left a comment underneath my previous post on futures pricing shenanigans, including a link to this article on the Global Research site...

"As detailed in an earlier article, a conservative calculation is that at least 60% of today’s $128 per barrel price of crude oil comes from unregulated futures speculation by hedge funds, banks and financial groups using the London ICE Futures and New York NYMEX futures exchanges and uncontrolled inter-bank or Over-The-Counter trading to avoid scrutiny. US margin rules of the government’s Commodity Futures Trading Commission allow speculators to buy a crude oil futures contract on the Nymex, by having to pay only 6% of the value of the contract. At today's price of $128 per barrel, that means a futures trader only has to put up about $8 for every barrel. He borrows the other $120. This extreme “leverage” of 16 to 1 helps drive prices to wildly unrealistic levels and offset bank losses in sub-prime and other disasters at the expense of the overall population."

The earlier article referred to above can be found here...

There are, of course, many different paths to something which approximates to the Truth, so I take some elements of these articles with a large pinch of salt. I would personally never describe 'Peak Oil' as an outright fraud for example. However, the material on the insanity of today's futures markets strikes me as being essentially along the right lines

And, of course, it comes as no surprise to see Goldman fucking Sachs named as one of the key Bubble Blowers. After all the good things they did with the subprime market it's reassuring to know that their hands are over oil pricing - in the same way that Californians must have slept easy in their unlit bedrooms knowing that Enron was looking after their electricity supplies

(NB Thanks to the power of margined leverage, six million dollar men are now trading at about 150 million dollars)

I don't know what's worse - having to consume a daily diet of the mainstream press, and even our own prime minister, completely blanking out the role of speculation in the rising costs of energy and food; pissing around promoting measures that won't improve the situation one little bit, or the risk, however slight, that some psychopath somewhere might pull a stunt to lock those inflated speculative prices in place

The problem with bubbles is that, sooner or later, they burst

Unless, some totally-random-coincidental-event occurs which genuinely makes the commodity you've been speculating in as scarce as you've been pretending it to be

It's not so easy to shore up a collapsing property market by making a few hundred thousand houses disappear overnight without killing potential buyers/ borrowers in the process

The supply of oil, or food, is a lot easier to fuck around with, particularly if you've got some friends in high places - about 35,000ft high

Goldmans seem pretty confident that oil's going to hit $200 - and they have proven to be very good at, um, guessing stuff



Anonymous said...

If they really thought oil was going to $200 would they tell us? Maybe it's a double bluff?

Stef said...

Don Harrold seems to think so

Me, I think there are too many bastards doing rather nicely out of the commodity bubbles and they'll do everything they can to keep them going for as long as possible

Stef said...

e.g. Officials say Iran attack "unavoidable"

Anonymous said...

I think the elephant in the room, to use a really shit expression and especially after watching the latest indiana jones film is 'nuclear war'. We're closer to it than anytime since the 50s aren't we? All the US presidential candidates seem to think a good old nuke is the solution to everything, which is mildly worrying.

Stef said...

I think there's a small herd of elephants in the living room

and, yes, yes we are

but they'd only be little bombs

ziz said...

There is a school of thought that says the proposed Polish missile defences are not to keep out the stray Iranian missiles but the Israeli ones.

Stef said...

and whilst in this general area, raving anti-semite John Stewart casting a satirical(?) eye on AIPAC