Manipulating Markets with Virtue

Obama has been getting some criticism from all sides for supporting, read "initiating", the International Energy Agency's decision to release 2 million barrels of petroleum for use from the Strategic Petroleum Reserve. The reason, ostensibly, was to make up for the decline of oil from Libya as a result of the non-war.

Libya ships 1.6 million barrels of oil a day, mostly to Europe. The total shipments a day in the world are 87 million barrels. 31 billion barrels a year. Despite the small amount released by the SPR, the price of oil dropped 10%, 25% in Brent Crude. This high response is said to be caused by the cost of oil at the margin, when it it delivered. Speculators, thinking that oil will continue to rise, buy oil and if they are fearful that governments might dump oil on the markets unsuspected, they buy more cautiously. The price drops.

The world's total GDP is 60 trillion dollars a year. 3 trillion goes for oil. A drop in 10% of the cost of oil is 300 billion dollars now available for something else. 20% is 600 billion dollars. Does that remind you of anything? That is the amount in Bernanke's QE2 that is about to expire.

The Three Horsemen of the Apocalypse

Jason Hsu, a partner at Research Affiliates, has an article on the current Western economic conundrum called The 3-D Hurricane and the New Normal. It describes how Debt, Deficit and Demographics are working to the disadvantage of the developed nations and to the advantage of the emerging ones. The West has become top-heavy with older citizens. There are less workers to work and produce and to subsidize the older ones. Deficit spending is acceptable as a short term adjustment to a downturn but, when used long term, it becomes debt which steals from productivity and buying power. Inflation and a decrease in living standards is the eventual outcome.

This conflict seems so clear and civilized. Both sides of this coin are so plainly etched. One wonders what progress could be made if we faced these problems squarely.

On the other hand we could confront the problems squarely and have a nice St. John's Dance.

The Gentler Side of Extortion

Cities have begun to modify their financial behavior, not on the constraint side but the policing side. In my neighborhood, the city has begun to enforce parking meters from eight a.m. to 10 p.m.--including saturday and sunday. Ticket fines have been doubled. Like the famous speed trap communities in the south whose municipal economies are entirely dependent on passing travelers nabbed for "speeding violations", the cities are expanding their incomes by expanding their intent.

Parking meters have always had the purpose of keeping parking available in commercial areas so those local establishments could serve customers. The parking was always available; no one could just leave his car and tie up the parking space forever. It encouraged customer flow. Now the government sees the parking space as a revenue source and is actively milking the spots for cash. The effect is not to keep spaces available for parking to benefit local businesses, it is to discourage parking at all. Restaurants especially are seeing the effect.

Government's new purview is the fine-tuning of society, the readjusting of genetic and cultural inequities and the balancing of fortune. It is a smiley face. But every once in awhile the real, self-serving predatory visage peeks out. And these small moments reinforce the growing popular belief that the government is simply not on the citizen's side.

Greece: Not a Pretty Picture

The Greeks are rioting in front of the Parliament building. From a recent report, about 200 people are furiously fighting the police. While there may be some question as to the significance of the size of the crowd, there is much more of a question as to the cause of their discontent. Why are they so angry and at whom is their anger directed? Certainly this is not just vague and antisocial animosity toward the police--unless they are just nondescript malcontents and witless troublemakers disguised as anarchists. One gets the impression they are objecting to the economic changes like lengthening the work week and delaying retirement to the range of other Common Market countries but, if that is their complaint, what is their alternative? The rest of Europe is furious at the Greek early retirement and short work week and it is doubtful they will underwrite the debt if these disparities continue; what do the rioters propose?

Are the rioters angry at the politicians who are cutting the benefits? Are they angry at the politicians who, in the past, promised benefits the nation--indeed, Europe--could not afford? Are they angry at the other Europeans who refuse to pay for the Greek benefits they themselves can not afford?

One often hears people remark as they look at their passport, "What an awful picture!", as if what was pictured had some other, subtle, occult explanation.

Corn: Bad Enough to Drive You to Drink

The corn-to-ethanol insanity offers a real opportunity: It allows an honest forthright politician to step forward, forsake the superficial and predatory support of the ethanol lobby, and stand on the side of honesty, logic and common sense. This is a real moment for a man of integrity to shine amid the dim bulbs of American politics! To make insider corruption, stupidity and self-centeredness the outsiders! To take a real stand! Shine the light on the self absorbed subsidy leeches! Expose and cleanse the lobbyists and educate the population on their subversive and anti competitive selfishness!

Any takers? Only one: Sarah Palin.

Corn: Clean and Green; Illogical and Corrupt

The difficulties the political world presents to the rest of us is well explained in the ethanol mess. Under President Bush it was decided to develop ethanol from corn to use to supplement petroleum in gasoline. The logic was that it would increase our independence of foreign petroleum producers and it burns to CO2 and H2O--clean, clean, clean. What it has become is a metaphor for American politics at its illogical, self-contradictory, country damaging worst.

The rumored real reason for its implementation was to ingratiate republicans to clean air advocates and to the Iowa caucus--both of whose disproportionate influence over American elections is legendary. What has resulted is a nightmare, perfectly predictable if one believes that what is subsidized, grows.

In 2006, 16 billion bushels of corn--14% of the corn crop--went to ethanol production; in 2011, 4.3 billion bushels of corn--33%--of the corn crop will go to the production of ethanol. Corn production now takes up 10% of American arable land. Worse, the energy that goes into the production of ethanol from corn is greater than the energy retrieved by burning it. And the ethanol production requires huge H2O volumes.

What the democracy has done is to divert a huge area of the farming industry into a project that does not do what it promises but will deliver on food shortages, higher energy usage, higher pollution and increased dependence on foreign petroleum producers.

Moreover it has created an infrastructure that must defend it, an infrastructure that must encourage it and special interests that want to increase it.

It has institutionalized corruption and stupidity.

Quo Vadis, Weiner?

After graduating from SUNY, the esteemed Representative Weiner went to work for then Representative Charles Schumer. The esteemed Mr. Weiner, after six years with Schumer, ran for and won a seat on the New York City Council. When Schumer left to take D'Amato's seat in the Senate, the esteemed Mr. Weimer ran for his House seat and won. He has been there doing what he does since.

A great problem underlies the esteemed Representative Weiner's future: If he resigns, what will he do? He would presumably have to go into the workplace and get a job. This "job" behavior is quite foreign to politicians and it is certainly foreign to the esteemed Mr. Weiner. His entire life has been spent in the pursuit of the political holy grail: permanent political position and its benefits. How would he apply for a job? What qualifications could he bring? And what about his bizarre personal history? What business could seriously consider him?

Somehow, despite liabilities that would stultify the average job seeker, Mr. Weiner will likely prevail. Why do you suppose that is?

Take "Brett", write "Weiner"

http://steeleydock.blogspot.com/2010/10/hi-its-not-brett.html

Rising Above Irony

"Candidate" comes from the same word meaning "white", or "pure", implying that candidates are motivated only by their concern for the welfare of the state. Indeed, the ancient Greeks had their government candidates wear white as a symbol of the nature of the position.

Our newest test of Psychological Homogeneity is the esteemed Representative Weiner. We are being asked to believe that a trashy, lying lowlife can, nonetheless, carry on the people's business without difficulty or conflict. And why not? The chairman of Ways and Means is a tax cheat, the head of treasury doesn't pay taxes at all, a former presidential candidate is an accused money launderer and one of the most powerful men in the house has a boyfriend who used to run a prostitution ring out of their house. Moreover, the esteemed Mr. Weiner has shown proclivities of greatness. When he was exposed his response was identical to that of a former president--he ruthlessly counterattacked and tried to discredit and defame the accuser and continued relentlessly to try to destroy him until the proverbial DNA was revealed.

One wonders if there is a link between character and outrage. We tolerate the most outrageous behavior. Syria is on a human rights committee, Saudi Arabia is a member of a women's rights organization. Now Weiner. At some point we must rise above irony.

Our candidates are pedophiles, adulterers, frauds, liars, and, if the company is predictive, probably much worse. Our sign of candidacy is not a white cloak, it is an ankle bracelet.