Sunday, April 01, 2012

$4 Gas Is A Result Of Wall Street Manipulation Says Former Senator Byron Dorgan

Senator Dorgan was the person Bill Moyers interviewed in our post last week.  The person who stood on the Senate floor 13 years ago and gave a speech on the impending doom by allowing Wall Street to run roughshod over our economy by deregulating it. 

If, by now, you follow financial markets and still don’t understand how financial firms are manipulating commodities, you are truly a dunce or deluded by your own ideological beliefs.   This is a topic we have hammered on since starting this blog.  In the beginning, when no one understood what was happening, it was easy for Wall Street to con the public.  But, over the last handful of years, the public has seen firsthand that Wall Street has inserted itself into the commodities supply chain.  Farmers, agri-processors, oil company executives, natural gas consumers, copper consumers, uranium consumers and other industrial commodities consumers have complained to the government that Wall Street is manipulating commodity prices.  These are buyers and sellers of commodities in the real economy, many of whom personally have used the commodities futures markets to conduct real business (you know, what these markets were set up for in the first place) for thirty or forty years.  No one in government ever listened. 

When the 2008 crisis hit and the world finally saw that JP Morgan, Goldman, Morgan Stanley and others were floating tankers of oil that they owned, when copper users were complaining that they couldn’t get supply because Wall Street firms were hoarding it in warehousing facilities, when natural gas clients in the real economy in New England were complaining that Wall Street was hoarding supply, no one in government said anything.   Well, except Bernie Sanders.  To say Wall Street is not the source of the commodity bubble is asinine.  Literally.   While we have no scientific method to ascertain the total price impact without forcing Wall Street to leave these markets, these firms have inserted themselves into the physical sale of commodities to extort their cut of the profits.  They have extended the supply chain.  If you don’t understand this, you don’t understand anything about what is going on in the world today.  This is a microcosm of how the global economy functions.   How finance has inserted itself into the underlying economy to distort and manipulate it in countless ways.   Globalization is fundamentally about American financial hegemony and the economic slavery of Americans and its trading partners.  That doesn’t even take into account the program trading, derivatives and other involvement that has pushed financial speculation up thousands and thousands and thousands of percent in the commodities markets. 

In this article the current CEO of Exxon is quoted as stating financial speculators add at much as 40% to the price of oil.  The recently retired CEO of Exxon has made similar statements over the last half dozen years.  Now, these are two men who are trained engineers.  They should clearly understand the scientific discovery process and should clearly be capable of some level of critical thought.  They have both operated in the commodities markets for thirty to forty years.   But, no one is listening.  Additionally, Fadel Gheit, most likely the only competent energy analyst I am aware of, even understands this as quoted in the article.  As does Janet Tavakoli, former quoted Goldman Sachs managers, agri-processors, etc who have commented and on and on and on about commodities manipulation.  You simply cannot insert yourself into the physical commodities  supply chain for profit and deny that you are impacting prices.  It is to deny that 2+2=4.

As we noted a very long time ago, it never mattered how much the dollar was worth, how much inflation we experienced, how much fundamental demand was in the market, or how much money was being printed, and even at times in our history, even when debt was monetized by the Federal Reserve, the price of copper traded in a band of 30-70 cents in the last one hundred years.  Copper still only costs 5 cents a pound to mine.  That is in U.S. dollars.   Regardless of whether you think dollars are worthless.  The price of copper then is equally worthless at only 5 cents a pound to mine.   Today.  Right now.  The cost of copper hit nearly $5 this cycle and is still close to $4 a pound.   The delta between production costs and market costs for consumers of copper is inefficiency.  That inefficiency in the supply chain for copper and all other commodities are being distorted as financial mobsters extort their cut.  It’s simple supply and demand.  It’s rudimentary math that a seventh grader could understand.   It’s commonly understood supply chain logistics.   When that supply chain is under stress, as it most certainly will be soon enough, Wall Street will take the shocks as a participant.  Something we have literally said at least three to four dozen times on here. 

This is exactly what happened with Enron.  This is exactly why energy prices skyrocketed in California and the west coast.  This is the same reason people died in heat waves because of Enron’s speculation in energy markets.  It’s how they were able to give the illusion of lack of energy supply that then caused brown outs.   That then caused unknowing politicians to state that California actually needed to build new power plants to deal with the lack of supply.  By manipulating supply by inserting themselves into the energy supply chain as energy traders.  It’s why the Enron executive team went to prison.  

Of course, the other option is that you can discount facts, reason, reality, basic math and truth and can believe Alan Greenspan who said, in support of Wall Street’s massive push into commodities, speculators added “liquidity” to futures markets.

Title link here.

posted by TimingLogic at 11:05 AM

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