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Oil is expensive because of speculators

Taibbi lays it out pretty clearly. Wikileaks: Speculators Helped Cause Oil Bubble | Rolling Stone Politics | Taibblog | Matt Taibbi on Politics and the Economy
The issue here, which I covered somewhat in Griftopia and in "The Great American Bubble Machine," revolves around the influx of speculative money into the commodities markets. Because of various changes to the way commodities were traded -- including a series of semi-secret exemptions handed out to commodities speculators, allowing companies like Goldman Sachs to popularize commodities speculation -- there was, by the summer of 2008, a cascade of investor money pouring into commodities, mostly all betting on a rise of commodity prices. Much of this might have been due to money flowing out of mortgages and into the "safe" haven of commodities, with exploding energy prices being an unwelcome side effect. While there was less than $20 billion of speculative activity in commodities in the early 2000s, by 2008 that number had jumped up to well over $200 billion, with virtually all that money being "long" money, i.e. bets on a rise in prices. All of that new money turned into a battering ram pushing prices through the roof. We are seeing the same phenomenon this year. The Wiki documents show that the Saudis had long ago concluded that this increased investor flow was a threat to disrupt the markets. An embassy cable from 2007 recounted a meeting U.S. officials had with Yasser Mufti, an Aramco planner. "The Saudi analysts indicated a link between higher oil prices and the influx of investor funds into the oil markets," it read. The cables also show that the Saudis urged the Americans to enact reforms to rein in Wall Street, calling for speculative limits and other changes. It also showed that some Saudi officials believed that speculation added as much as $40 to the oil price during the height of the bubble. All of this is significant because both the Bush administration and the Obama administration have denied this narrative to various degrees. The CFTC only recently admitted that speculation played a role in the 2008 mess, having originally (and stubbornly) blamed supply and demand issues. Subsequent analyses have shown that the Saudi position, that worldwide demand for oil never increased nearly enough to account for the gigantic 2008 price spike, was almost certainly correct.

May 26, 2011

Obama issues executive order rescinding hundreds of regulations that "stifle business"

White House unveiling plans to curb regulations
The White House would eliminate requirements for trapping polluting vapors at gasoline stations and let employers and hospitals file fewer reports as part of a plan it announced Thursday to ease regulatory burdens on business. More than four months after President Barack Obama ordered agencies to weed out rules that stifle economic growth, the administration on Thursday released some details of hundreds of regulatory changes that the White House said could save businesses billions of dollars and tens of millions of hours of work. Cass Sunstein, the White House's regulatory chief, told the conservative American Enterprise Institute that 30 departments and agencies had submitted plans for regulatory changes aimed at saving money and aiding economic growth. "Complexity and redundancy are often the enemy of innovation," he said in a speech to the group.

May 25, 2011

SEC approves new rule paying huge cash bounties to whistleblowers

The Two Republicans on the five person board opposed the rule, fearing that it would inundate the SEC with cases to investigate. Concern trolls are concerned. Divided SEC approves whistleblower rule - Yahoo! News
WASHINGTON (Reuters) – A divided Securities and Exchange Commission approved a new program that would compensate whistleblowers whose tips lead to sanctions of over $1 million. In a 3-2 vote on Wednesday, the SEC backed what has grown to become one of the most contentious provisions required under the Dodd-Frank Wall Street overhaul law. Companies from Google Inc to JPMorgan Chase & Co have expressed fears the whistleblower rule could undermine internal compliance programs at public companies. Whistleblowers whose tips lead to cases that result in sanctions exceeding $1 million can be eligible for a reward of between 10 percent to 30 percent of the total amount. Although the rule encourages whistleblowers to first report problems internally, it does not mandate it. "Today's rules are intended to the break the silence of those who see a wrong," said SEC Chairman Mary Schapiro.