OK, Maybe I was Wrong to Dismiss the Oil Speculation Theories

I've been dismissive of accusations that speculation is responsible for most of the oil price run up.

I have always suggested that arbitrage might cause excessive volatility, but have been dubious on the idea that speculators are responsible for most, or even much, of the current oil price run up.

Unlike electric power, where one can shut down a plant to juice the market, you can't hide all that oil, you have to pay to put it somewhere

Well, the CFTC just discovered that Vitol, a company that thought to primarily be in the business of hedging oil for large consumers, like Southwest Airlines, to save costs, has been aggressively holding huge amounts of futures contracts as a speculative investment too, at one point holding about 11% of all trades on the New York Mercantile Exchange (Nymex).

So the CFTC now pegs the percentage of speculative, i.e. non-consuming, trading at around 81% of volume.What's more the CFTC found out about this by mistake.

I still believe that the primary cause of the run-up was supply and demand lines crossing, but with this level of speculation, and this level of leverage, it's reported that Vitol could have purchased over $8 billion in oil futures for less than $1 billion, it's possible that there were issues of excess volatility and over-shoot on the price of oil.

And It Will End With "Settled Without Any Admission of Wrongdoing"

Because, notwithstanding the recent move by the CFTC to sue oil speculators for market manipulation, I do not believe that there will be a vigorous investigation of criminal wrongdoing by any arm of the Obama administration.

Still, when I read this:

After oil prices surged past $100 a barrel in 2008, suspicions that traders had manipulated the market led to Congressional hearings and regulatory investigations. But they produced no solid cases in the record run-up in gasoline prices.

But on Tuesday, federal commodities regulators filed a civil lawsuit against two obscure traders in Australia and California and three American and international firms.

The suit says that in early 2008 they tried to hoard nearly two-thirds of the available supply of a crucial American market for crude oil, then abruptly dumped it and improperly pocketed $50 million.

The regulators from the Commodity Futures Trading Commission would not say whether the agency was conducting any other investigations into oil speculation. With oil prices climbing again this year, President Obama has asked Attorney General Eric H. Holder Jr. to set up a working group to look into fraud in oil and gas markets and “safeguard against unlawful consumer harm.”

In the case filed Tuesday, the defendants — James T. Dyer of Australia, Nicholas J. Wildgoose of Rancho Santa Fe, Calif., and three related companies, Parnon Energy of California, Arcadia Petroleum of Britain and Arcadia Energy, a Swiss company — have told regulators they deny they manipulated the market.

If the United States proves the claims, the defendants may give up $50 million in profits that were believed to be made as a result of the manipulation and also pay a penalty of up to $150 million.

The commodities agency says the case involves a complex scheme that relied on the close relationship between physical oil prices and the prices of financial futures, which move in parallel.

In a matter of a few weeks in January 2008, the defendants built up large positions in the oil futures market on exchanges in New York and London, according to the suit, filed in the Federal Court in the Southern District of New York.

At the same time, they bought millions of barrels of physical crude oil at Cushing, Okla., one of the main delivery sites for West Texas Intermediate, the benchmark for American oil, the suit says. They bought the oil even though they had no commercial need for it, giving the market the impression of a shortage, the complaint says. 

It made me smile.

Finding a Solution, and Applying it to Narrowly

In looking at the role of speculation on oil prices, a Senate committee is looking at increasing margin requirements:

"I think there's an orgy of speculation that we ought to be deciding to do something about," said Sen. Byron Dorgan, D-North Dakota.

He and others raised the idea of changing the margin or amount investors must pay up front in order to engage in oil speculation. It would be a hugely significant change in financial markets. Dorgan said stock speculation requires a 50% margin, but commodities like oil demand a much lower threshold, just 5% or 7%.

If you look at the credit crunch generally, the real problem is excessive leverage. Margins should be raised to the 75% range, where they were for stocks before the Fed cut them around 1980, and they should be applied to all investments.

Energy and Speculation...A Problem....Not So Much

Well, we have analysts saying that oil and gas are have had twice their price doubled by speculation, but I think that this is a load of crap. I agree with Paul Krugman, that the effects are smaller than that. If you were to argue that there were a 5% effect on the price over the short term, I would buy that, but 50% is way out of ling.

Krugman had a nice picture on the relationship between oil futures, contracts for later delivery, and spot prices, where the oil is delivered immediately:
Simply put, there would be more of a spread if there were more of a speculative effect.

That being said, market volatility, which aggressive speculation exacerbates, does a lot of damage otherwise, so I do support some of the measures that the Congressis considering in order to reign in excessive speculation.

That being said, at its core, we have demand for raw materials outstripping supply. That's why we are seeing things like a 96% jump in iron ore prices, a market in which there are no futures contracts.

More Downward Pressure on the Dollar

This makes it more likely that other nations will be putting part of the foreign reserves in non-US currencies.

This will place further downward pressure on the USD, and further upward pressure on interest rates.

Iran Asks Japan to Pay Yen for Oil, Start Immediately
uly 13 (Bloomberg) -- Iran asked Japanese refiners to switch to the yen to pay for all crude oil purchases, after Iran's central bank said it is reducing holdings of the U.S. dollar.

Iran wants yen-based transactions ``for any/all of your forthcoming Iranian crude oil liftings,'' according to a letter sent to Japanese refiners that was signed by Ali A. Arshi, general manager of crude oil marketing and exports in Tehran at the National Iranian Oil Co. The request is for all shipments ``effective immediately,'' according to the letter, dated July 10 and obtained by Bloomberg News.

The yen rose on speculation for an increase in demand for the currency, the result of Japan's annual 1.24 trillion yen ($10.1 billion) of oil imports from Iran. Central bankers in Venezuela, Indonesia and the United Arab Emirates have said they will invest less of their reserves in dollar assets because of the weakening currency.

....

The Big Picture on the "Stop Excessive Speculation Act"

I've always been a doubter that speculation is responsible for much of the run up in oil prices, but I wholeheartedly the proposed "Stop Excessive Speculation Act", which would crack down on speculators by allowing the Commodities Futures Trading Commission (CTFC) to regulate futures market and, "differentiate between "legitimate" and "illegitimate" hedge trading".

The reason that I support this is because it is a real sea change. It is a refutation of the myth that completely unsupervised markets self-regulate to the benefit of society.

It is the arbitrage and exotic financial vehicles that have been created in the past nearly three decades of free market fundamentalism, frequently lauded by Alan "Bubbles" Greenspan, which are at the core of our current credit crunch.

The markets have devolved into complex self-serving insider deals that have harmed everyone.

I think that this bill is a baby step, but it's a step in the right direction.

Linkage New Year's Edition

• Ten years in, nobody has come up with a use for blockchain (Hacker Noon) "After years of tireless effort and billions of dollars invested, nobody has actually come up with a use for the blockchain—besides currency speculation and illegal transactions.:
• Eliminating the Human (MIT Technology Review) Lansdowne High School alum and former Talking Heads front man David Bryne on technology.  Money quote, "I have a theory that much recent tech development and innovation over the last decade or so has an unspoken overarching agenda. It has been about creating the possibility of a world with less human interaction. This tendency is, I suspect, not a bug—it’s a feature."
• Ayn Rand Helped the FBI Identify It's A Wonderful Life as Communist Propaganda (Open Culture) Yes, one more thing to hate that psychopath for, and I don't even like the movie.
• U.S. judge orders oil-spill response plan for Dakota Access Pipeline (Reuters) The Dakota Access pipeline has been put on hold, because they have no oil spill reponse plan.
• Kicking Away Tiny Tim's Crutch Because His Father Voted for Trump (This is So Gay) This is a common, and deplorable phenomenon of the left wing pundits, Eric Alterman in this case.
• Worst headlines bloopers of 2017: The best of Lower Case (Columbia Journalism Review) So funny. Oh Man! Oh God!

Oh Man! Oh God!

Payback's A Bitch

Everyone is freaking out because Argentina is renationalizing its formerly state owned oil company, YPF:

Argentina says it will seize a controlling interest in oil company YPF that is owned by Spanish firm Repsol.

President Cristina Fernandez said a bill would be presented to the Senate allowing the government to expropriate 51% of YPF shares.

The move, announced on national television, was welcomed by her cabinet and Argentina's regional governors.

Spanish Foreign Minister Jose Manuel Garcia Margallo said the action had "broken the climate of friendship".

Speaking after a government crisis meeting, Mr Margello told journalists his government would take "clear and forceful measures", although he did not specify what these would be.

In a statement Repsol said it "considers the announced measure to be manifestly unlawful and gravely discriminatory".

The sale of the former state owned energy company was in the middle of the Argentine financial crisis, when creditor nations held a figurative gun to the Argentine government's head, so it was sold at fire sale prices.

As to concerns about Argentina no longer being "friendly" to foreign investment, it's not a big deal.

Argentina has been growing more rapidly than all of its neighbors, including the vaunted Brazil.

Additionally, foreign investment won't go away, though it might demand an additional 50 basis points return.

Also, reduced foreign investment also less risk of the speculative inrushes that cause crashes which result in the loss of economic sovereignty and a shredding of middle class.

The recent lesson of Argentina, and of Iceland, as well as that of Malaysia during the Asian financial crisis, is that the so called Washington consensus, that currency speculation and completely unimpeded capital flows, that this will produce unparalleled economic growth, is completely wrong.

This is not an expropriation, this is justice. The assets were stolen by the looters in the first place.

Is the Credit Crunch Just Corruption, or Are We Acting from Profound Ignorance

Wolfgang Münchau wonders if this is more than a simple financial crisis, because we've already had what seems like our 4th dip into this bathtub, and the financial system is still dirty.

Rather, he posits that the problem is that that the basic structure of our economies have been established by economist whose model of the world is simply wrong.

This is analogous to the Great Depression, where the economists and regulators, following a caricature of Adam Smith's work, worked for creative destruction, to weed out the weak firms, and so, in the middle of a downward spiral, central banks restricted the money supply to wring out the "weakness":

....Its principal villains are therefore not bankers, but economists – not in their role as teachers and researchers, but as policy advisers and policymakers.

So who are they? I recall a wonderful episode told by Jagdish Bhagwati in his book In Defense of Globalization when he quoted John Kenneth Galbraith as saying: “Milton’s [Friedman’s] misfortune is that his policies have been tried.” In fact, this is not the worst that could happen. The worst is for economists to try out their own theories themselves. This happened to several highly respected academics who have since become central bankers or finance ministers. If, or rather when, they turn out to be wrong, they risk a double reputational blow – as policymakers and as academics. So do not count on them to change their mind when the facts change.

In fact the collapse of Long Term Capital Management in the 1990s is a classic case of this, where you had world class economists with world class models being poleaxed by reality, which, through the wonders of leverage, caused a near collapse in world financial markets that required a Federal Reserve bailout.

I think that much of the genius of Keynes was that he was willing to adjust his theory when reality proved him wrong, which is rare in anyone, particularly an academic.

Interestingly enough, Münchau suggests that "Neo-Keynsian" model of the economy, where financial markets (which, BTW, would include the housing bubble) play no meaningful roll in the economy, had contributed mightily in the current crisis.

I'm not sure exactly what a "Neo-Keynsian" is. Truth be told, I barely grok what an old Keynsian is, though on hitting "the Wiki" it may be that "Neo-Keynesian" economics is akin to "Keynesian" in the same way that "Neo-Liberal" is to "Liberal", which is to say "not at all":

Several of them have been leading proponents of an economic theory known as New Keynesianism. It is, in fact, probably the most influential macroeconomic theory of our time. At the heart of the New Keynesian doctrine stands the so-called dynamic stochastic general equilibrium model, nowadays the main analytical tool of central banks all over the world. In this model, money and credit play no direct role. Nor does a financial market. The model’s technical features ensure that financial markets have no economic consequences in the long run.

This model has significant policy implications. One of them is that central banks can safely ignore monetary aggregates and credit. They should also ignore asset prices and deal only with the economic consequences of an asset price bust. They should also ignore headline inflation. An important aspect of these models is the concept of staggered prices – which says that most goods prices do not adjust continuously but at discrete intervals. This idea lies at the heart of some central bankers’ focus on core inflation – an inflation index that excludes volatile items such as food and oil. There is now a lively debate – to put it mildly – about whether an economic model in denial of a financial market can still be useful in the 21st century.

He is saying that academicians who value the consistency of their theory over reality have been placed in positions of regulatory authority, and that the inevitable regulatory failures are at the core of the credit crunch.

I agree wholeheartedly.

His prescription, creative destruction by allowing, "some defaulting banks to go bust," is a part of the solution, but I do not believe that it addresses the "whys" of the bubble, it only wrings out the froth, leaving the ground fertile for another bubble.

I believe that the core of the problem is one of governance values, particularly in the US and the UK, that speculative arbitrage purely for profit is it's own virtue.

Certainly, when Alan "Bubbles" Greenspan lauded financial innovation, this was his core value.

At the level of the regulator, this attitude needs to change. Speculation should not be viewed as a virtue, but rather an unavoidable and frequently toxic byproduct of a functioning financial market, much in the same way that, for example, dioxins are a byproduct of the paper making process.

We need the paper (in both senses of that work) to function as a society, but the toxic emissions (again in both senses of the word) should be kept to as low a level as is practical.

In the case of the financial markets, this means the following:

• That leverage should be regulated and restricted.
• That speculation should be discouraged though some mechanism (I favor Dean Baker's idea of a financial transaction tax as a start)
• That overly complex financial instruments should be banned.
• That the means of determining pay and bonuses in the financial services industry needs to be mended somehow, because the current model encourages reckless behavior.

Obama Just Whitewashed Malaysian Slave Trafficking

The Obama administration has just upgraded Maylaysia's human trafficking tier, despite the absence of any evidence of improvement:

The United States is upgrading Malaysia from the lowest tier on its list of worst human trafficking centres, US sources said on Wednesday, a move that could smooth the way for an ambitious US-led free-trade deal with the south-east Asian nation and 11 other countries.

The upgrade to so-called “tier two watch list” status removes a potential barrier to President Barack Obama’s signature global trade deal.

A provision in a related trade bill passed by Congress last month barred from fast-tracked trade deals Malaysia and other countries that earn the worst US human trafficking ranking in the eyes of the US State Department.

The upgrade follows international scrutiny and outcry over Malaysian efforts to combat human trafficking after the discovery this year of scores of graves in people-smuggling camps near its northern border with Thailand.

The State Department last year downgraded Malaysia in its annual “Trafficking in Persons” report to tier three, alongside North Korea, Syria and Zimbabwe, citing “limited efforts to improve its flawed victim protection regime” and other problems.

But a congressional source with knowledge of the decision told Reuters the administration had approved the upgraded status. A second source familiar with the matter confirmed the decision.

Some US lawmakers and human-rights advocates had expected Malaysia to remain on tier three this year given its slow pace of convictions in human-trafficking cases and pervasive trafficking in industries such as electronics and palm oil.

………

In its report last year, the State Department said Malaysia had reported 89 human-trafficking investigations in the 12 months to March 2014, down from 190 the previous year, and nine convictions compared to 21 the previous year.

In the latest year to March, Malaysia’s conviction rate is believed to have fallen further, according to human-rights advocates, despite a rise in the number of investigations. That reinforced speculation Malaysia would remain on tier three.

“I would be stunned if they are upgraded. They have done very little to improve the protection from abuse that migrant workers face,” said Phil Robertson, deputy director of Human Rights Watch’s Asia division.

This decision has the effect of condoning slavery in Malaysia, and throughout the world.

Of course, this does not matter to Barack Obama, because is looking at the TPP in the Pacific, the TTIP with Europe, and TiSA^* world wide.

^*The TiSA is arguably far worse than the other two deals, and has as one of its goals to make financial, insurance, and investment regulation next to impossible.

We Don't Need More Democrats, We Need Better Ones

In response to strategies to deal with Donald Trump and his nefarious agenda, Blue Dog/New Dem type Democratic members of the Senate are capitulating in advance:

While congressional Democrats were certainly slow to come to grips with Donald Trump’s election and therefore appeared hesitant to back the calls for resistance that flooded the streets in major American cities in the immediate aftermath, they’ve since embraced their role as the loyal opposition. But even as most Senate Democrats gear up for confirmation battles with a whole host of questionable Trump Cabinet picks, some of their Democratic colleagues are already willing to kowtow to the president-elect’s most fundamental decisions.

………

Ohio Sen. Sherrod Brown argued for a strategy of Democratic obstruction to a Trump agenda by pointing to Republicans’ past intransigence. “We’re going to help them confirm their nominees, many of whom are disqualified? It’s not obstruction, it’s not partisan, it’s just a duty to find out what they’d do in these jobs,” he said. Brown pointed out that Republicans have “been rewarded for stealing a Supreme Court justice,” referring to the nearly yearlong delay of hearings on President Obama’s nominee to succeed deceased Supreme Court justice Antonin Scalia.

Still, nearly all the five Democratic senators facing re-election in 2018 in states that strongly supported Trump — by 19 percentage points or more — apparently disagree with their more progressive colleagues and have rushed to signal their willingness to cooperate with the new regime.

“That’s just bullsh%$,” West Virginia Sen. Joe Manchin, [Whose daughter was (until it became public0 given a phoney degree and also runs Mylan which gouges people on EpiPens] whose state supported Trump by 42 percent, said of his fellow Democrats’ strategy of opposition. “I’m going to help [Trump] when I can. But I’m going to be holding him accountable when I need to,” he added.

 "When I need to," means "I will never hold him accountable."

North Dakota Sen. Heidi Heitkamp was quick to suggest that she is ready to work with Republicans on legislation to invest in “clean coal” technologies, as she praised a decision to boot oil pipeline protesters from Standing Rock. Heitkamp was one of the first Democrats to meet with the president-elect and his transition team at Trump Tower last week. Trump won North Dakota by more than 36 points and there’s speculation he is considering Heitkamp for secretary of agriculture or energy.

Supporting police brutality against Indian protestors forever. Gotta love it.

Indiana Sen. Joe Donnelly, who is also up for re-election in 2018 and who represents a state that went for Trump by 19.3 percentage points, has already said he is ready to work with the incoming Trump administration on military mental health care issues, curbing the exodus of U.S. jobs to foreign countries and combating the opioid epidemic.

“We can’t just say ‘no’ because the idea comes from the other side of the aisle,” argued Montana Sen. Jon Tester last week. Tesler has long signaled a willingness to work with Trump. He chairs the Democratic Senatorial Campaign Committee that failed to orchestrate his party’s wresting control of the upper chamber from the GOP.

In May, Tesler said about Trump that “he’s got some pretty goofy opinions, but hopefully we’ve got some stuff we can work on,” Tesler is now up for re-election in a state that preferred Trump by 20 points.

I have identified the differences between conservative Democrats and liberal (moderate)  Republicans:

A liberal (moderate) Republican will:

• Talk about the need to work across the aisle.
• Plead for moderation.
• Chastise his party for extremism.
• Sometimes vote against his party.
• When the vote is close, and it is important, he will vote with the Republicans.

A conservative Democrat will:

• Talk about the need to work across the aisle.
• Plead for moderation.
• Chastise his party for extremism.
• Sometimes vote against his party.
• When the vote is close, and it is important, he will vote with the Republicans.

So-called experts are puzzled as to why voters, "Vote against their own interests," for Republicans.

It's simple: With people like this in our party leadership, they know that we'll never deliver on promises to make their lives better.

Hell, Hillary Clinton's whole f%$#ing campaign was a promise not to make ordinary folks' lives better, and we saw how well THAT worked out.

This is Not the Resource Curse

One of the perplexing questions of modern society is how the discovery of riches, particularly things like oil and diamonds, can make a country less well off. (the "resource curse")

So now we have people wondering why the outsized role of finance in the UK does not create prosperity.

This one is pretty easy:  Finance is not wealth you dig up from the ground, and it is not meaningful productivity, though it can help getting actors with capital in touch with actors who need capital.

It produces nothing, and when it dominates an economy, as it does in the UK, it is actually highly parasitic.

No one asks why bank robbers don't benefit society, and as William Black has noted, "The best way to rob a bank is to own one."

To argue that the City hurts Britain’s economy might seem crazy. But research increasingly shows that all the money swirling around our oversized financial sector may actually be making us collectively poorer. As Britain’s economy has steadily become re-engineered towards serving finance, other parts of the economy have struggled to survive in its shadow, like seedlings starved of light and water under the canopy of a giant, deep-rooted and invasive tree. Generations of leaders from Margaret Thatcher to Tony Blair to Theresa May have believed that the City is the goose that lays Britain’s golden eggs, to be prioritised, pampered and protected. But the finance curse analysis shows an oversized City to be a different bird: a cuckoo in the nest, crowding out other sectors.

I would also note the the international finance sector has much to do with creating the "resource curse" in places like Angola, where they finance grandiose projects, launder money, and foment destructive speculation.

Why would they do anything different in the City of London than they do in Luanda?

Unfortunately, modern politicians want to negotiate with them, which makes as much sense as negotiating with a tapeworm.

Clearly, They Are Barbarians, and We Must Invade to Convert Them to Democracy and Capitalism

Kazakhstan has a problem with bad banks.

The oil rich former Soviet Republic has spent billions attempting to save its failing banks, and now, it is ditching the banks, and will write down its people's debts, the exact opposite of what Geithner and the Federal Reserve did in the USA.

I expect the new Kazakh President to become Hitler of the Week^™ shortly, because bailing out people and letting the banksters and their investors take the the hit is just unAmerican.

I am aware that there is very little to recommend Kazakhstan.

Kassym-Jomart Tokayev was elected in an unfair election, hand picked by his predecessor, Nursultan Nazarbayev, who is notorious for the suppression of free speech, torture, etc.

This is a case of a stopped clock being right twice a day:

Kazakh President Kassym-Jomart Tokayev said he'll write off bad loans held by a sixth of the central Asian country's population, while signaling a sharp change in policy to end costly state bailouts of private banks.

The loan-forgiveness program is Tokayev's first major policy announcement since he was elected president on June 9 in a choreographed transfer of power that began when longtime leader Nursultan Nazarbayev stepped down as head of state in March. His victory was met with rare and widespread protests.

Bank bailouts are also a sensitive issue in Kazakhstan, which has been mired in a decade-long crisis in which the government has pumped at least $18 billion into lenders to keep the sector from collapsing under the weight of bad debts. The central bank is conducting a review of asset quality, prompting speculation that a new round of bailouts may be in the works.

………

While the debt-relief initiative may help lenders, the total cost is likely to come in at "a bit less than $1 billion," according to Tokayev. More than 3 million Kazakhs in the energy-rich country of 18 million will get help to escape debts averaging 300,000 tenge ($790), he said. It is aimed at "people who find themselves in very difficult living circumstances," he said.

About 4,000 people were detained by police during a rare outburst of protests against what activists said was a lack of real choice in the recent vote, which Tokayev won easily with 71% support. Leader-for-life Nazarbayev, 78, handed the presidency to Tokayev in March, who called the early election "to remove any uncertainty." International observers criticized the conduct of the vote.

The math is pretty simple:  $18 billion did not solve the problem, versus less than $1 billion to write down personal debt, and let the banks and the banksters burn.

Works for me.

Cue the Internecine Clusterf%$#

The Saudi King, Abdullah bin Abdulaziz Al Saud, has died at age 90, and will be replaced by his brother, Salman ibn Abdilaziz Al Saud, who is 79 and is rumored to be suffering from dementia:

Saudi Arabia's King Abdullah bin Abdulaziz Al Saud has died at age 90, state television reported early on Friday, with his brother Crown Prince Salman bin Abdulaziz succeeding him as the new ruler of the world's top oil exporter.

King Salman, 79, immediately appointed his half-brother Muqrin as his crown prince and heir, a move seen to avert widespread speculation about the path of the royal succession.

State television said King Abdullah, who took power in 2005 after the death of his brother King Fahd, died of pneumonia. He was admitted to the hospital on December 31, state media reported at the time.

It's pretty clear that Salman is a place holder.

It is tough to figure out what is going on in the mess that is the dynastic mess that is the House of Saud, but a year ago, I would a have argued that Prince Bandar bin Sultan bin Abdulaziz Al Saud was next in line after King Salman, but seeing as how he has been the driving force behind backing the group now known as ISIS/ISIL/IS while trying to overthrow the Assad regime in Syria, and it appears that he was fired from his position as Director General of Saudi Intelligence Agency as a result.

This sort of dynastic instability has does not bode well for the future of the House of Saud, which to my mind, is a good thing.

Economics Update

It appears that Ben Bernanke has a mentioned a secret plan to win the war in Vietnam protect the US dollar from inflation,^* which will prevent inflation when the economy recovers, and this has driven Treasuries higher, and their yields lower:

Fed officials said in a report submitted as part of Bernanke’s testimony that policy will be “tightened” when the labor market improves, an economic recovery takes hold and pressures holding down inflation “diminish.” The comments follow a rally in stocks and a rebound in corporate earnings that have stoked speculation the worst recession in half a century is ending.

I'm not an economist, but I still think that one way to get out of this mess is to inflate our way out of this, which will have the effect of devaluing the debt which is holding back our economy.

I understand that it can (*cough* Zimbabwe *cough*) get out of hand, but it seems to me that too many people are under water for any recovery now.

Considering the fact that Americans are paying down their debt at the fastest rate since 1952, I do not see an alternative.

IMHO, We are in a deflationary trap, and creating inflation is the way out of it.

In any case, Bernanke's statements about inflation boosted the US dollar, and his statements about recovery boosted crude oil prices.

^*It's a "Tricky Dick" Nixon reference, OK?

TransCanada, Calm Down and Have a Piping Hot Cup of Shut the F%$# Up

Everyone's favorite oil spill pipeline company is suing the United States for stopping the pipeline:

TransCanada said on Wednesday that it would seek $15 billion in damages over the Obama administration’s decision to cancel the company’s Keystone XL pipeline project.

The company is taking the unusual step of suing through the North American Free Trade Agreement, calling the decision “arbitrary and unjustified.” The Canadian business also filed a lawsuit in Houston asking that the decision be overturned.

“TransCanada has been unjustly deprived of the value of its multibillion-dollar investment by the U.S. administration’s action,” the company said in a statement. “Rather, the denial was a symbolic gesture based on speculation about the (false) perceptions of the international community regarding the administration’s leadership on climate change.”

Seriously, just stop whining.

CFTC Showing Some Balls

The Commodity Futures Trading Commission is considering eliminating waivers on position limits in wheat trading:

The [Senate] subcommittee [on Investigations] released a study in June that showed wheat prices were inflated by index investors last year. It called for the elimination of waivers that allow funds to hold more than 6,500 Chicago Board of Trade contracts at any one time, which would lower the influence of non-agricultural buyers and curb speculation. [CTFC Chairman] Gensler said earlier this month the CFTC, which currently grants waivers for agricultural products, also is considering limits on holdings by oil and gas speculators.

It's been a while since I've seen stuff like this, and I can't quite remember the word for it....Oh....Yes....It's called regulation.