Oil price, the big scam?

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Christophe
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Oil price, the big scam?




by Christophe » 26/06/08, 10:10

Interesting article and analysis found on: http://www.adicie.com/archives/232

Is the current oil crisis ultimately a huge fraud? The Commodity Futures and Trading Commission's (CFTC) US survey seems to suggest that the record high price per barrel would result from financial speculation rather than a stock shortage as everyone would like us to believe.

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For months, it has been suggested that the soaring price of a barrel of crude oil is the result of the civil war in Iraq and Nigeria, strikes in Norway, growth in China, and so on.
The other version could be that the price of oil climbs because of: falling dollar, financial speculation and margin redemption (cash payment only a fraction of the purchase price of a security, and payment of interest on the residual amount).
Everything is connected ! Even the global food crisis makes sense in this montage. An article by Mike Whitney put the bullet in my ear, explaining why the current oil crisis is a huge scam that evades the real responsibility of speculators by referring to complementary elements.

First, it's important to understand why the dollar is so weak. The first factor concerns the Federal Reserve's monetary interests, which are well below the rate of inflation for a decade. We must add the deficit of $ 700 billion and the foreign debt of $ 9 Trilliards to ask how this currency has not literally exploded rather than drop dangerously! That being said, my purpose is not to talk about the dollar, but about oil. It should be noted that the falling dollar is contributing to the rise in oil prices. The mechanism is simple since the decline of the dollar is a powerful driver for the price, prompting massive investment.

Now, let's see this concept of margin buying ...
Taking a conservative calculation, it seems that more than 60% of the price of a barrel of crude oil comes from deregulated speculations, especially within "hedge funds". You should know that it is possible to buy oil-related stocks on the financial markets (Nymex US) for only 6% of its total value. This provides 1 leverage for 16 that allows for beautiful trading, but also raises prices to unrealistic levels, while offsetting the disaster of sub-prime losses and other financial catastrophes.
In other words, investment banks and their financial partners can easily disrupt the entire system, resulting in a global disaster that goes far beyond financial institutions to directly affect the population, even causing a global food crisis. I do not even talk about the price of gas at the pump that worries the vast majority of people, because it's indecent when you know that millions of people can not even eat their bowl of rice every day.
It is obvious that these same investment banks want to save their skin since they are bankrupt since the credit problems in the United States. By making some daring bets on oil, it is possible to recover a few billion that will be life-saving on the balance sheet.

In any case, the funds must be able to circulate. The worst case scenario would be for the US Federal Reserve to turn a blind eye to the capitalization of the impoverished credit-related shares, allowing the price of raw materials such as rice, corn, wheat, and ... oil to skyrocket.
Is it possible that the venerable institution of financial regulation looks on the other side for the banks to come out of the abyss?
It is possible to validate this theory by observing the recent decision of the Federal Reserve to make available three times $ 75 billion in the form of short-term loans for banks. Of course, there is still not a single cent that is granted directly to strangled owners, but banks can continue to build a debt trap and capitalize more and more by destroying the fundamentals of the financial market. Among the interesting figures, Chinese oil demand has increased over the past five years by about 920 million barrels of crude oil. Over the same period, financial speculators have issued claims in the form of shares for 848 million barrels. The conclusion is frightening since the speculation is almost at the height of the Chinese increase. It is therefore a little too easy to accuse China of consuming too much oil when the financiers have rushed on oil speculation to a practically similar extent. There is no need to turn the numbers in any direction as financiers like to do to understand that such a demand expands the market and raises the price.

Apart from the Federal Reserve, which seems to be turning a blind eye, I also have the impression that the Commodity Futures Trading Commission is loosing the bridle, allowing some speculators almost unlimited access to the consumer goods market. (commodities). Only, it is this same institution that investigates the current scandal. You do not see it as a small problem?
We must not fool ourselves, we are in the presence of a huge financial scam that is covered by the appearance of a pseudo crisis. The trace goes back to the highest levels of the various American regulatory authorities. The Federal Reserve is running the money press at full speed and opens the floodgates of credit to allow even more speculation. Investment banks have fewer brakes to speculate wrongly through the technique of margin buyback, trying to save what can be the disaster sub-premiums.
Once again, I point to my ticket on the casino of finance. It's still crazy that a poor nigger blogger like me can see clearly in this vast scam, but the system continues. Meanwhile, people are starving, others are ruined, and the majority wallowing in a serious financial situation.
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by Christophe » 26/06/08, 10:11

And here is a particularly interesting reaction:

The "speculators" have good back, especially when they are anonymous and supposed untouchable ...

The real reasons for the rise in oil (and other commodities) are elsewhere, and managers clearly identifiable.

The number one reason for these price increases is the fall of the dollar. This one is for the moment organized and controlled. This devaluation of the dollar is led jointly by the Fed (emanation of US banks) and the US Treasury. Do not believe the rhetoric of Bernanke or Bush on the wish for a "strong dollar". No initiative will ever be taken in this direction from them. The constant devaluation (the dollar has lost 97% of its value in 30 years) is vital from their point of view. The most indebted country in the world has no choice but to try to pay us its debt in PQ $.

The other reason for the rise in MP is the fall of the EURO. Yes, it's less visible than for the dollar, especially when we try to compare ourselves to them we have the false impression that our currency is rising. False impression reinforced by the acting of a JC Trichet allegedly obsessed with the fight against inflation. In fact, if there is inflation, it can obviously only come from Trichet and the European Central Bank. Inflation being the creation of money supply, and the ECB having the monopoly of this monetary creation (without any democratic control henceforth), the speeches of Trichet sound particularly wrong from someone running the full billboard to water the banks with cash. This is the same Trichet obviously protesting against wage increases in Germany obtained by the unions, always in the name of the so-called "fight against inflation".

If we stop comparing the Euro to the dollar, to compare it for example to gold, the most stable safe monetary value, the Euro would have fallen by 18% for a year. So there is much to contribute to the rise in oil and the degradation of our purchasing power.

Another reason for the rise in oil whose media do not speak much, if at all: subsidies. Some countries in fact largely subsidize the consumption of oil or petroleum products. This is still the case in China (although this policy is changing at the moment), but also in the Middle East, Latin America ... These subsidies distort the usual market rules. Normally, such strong price increases would have had to dampen world demand, especially in a US recession, but it is clear that this is not precisely because of these subsidies.

The question of establishing such subsidies in Europe is at this moment, see the rather tough debate between Sarkozy and Merckel. I note that both Sarkosy and the PS opposition are about the same on this issue, calling for such subsidies either for the population as a whole or to protect certain professions. This approach is absurd because in the long run it contributes to worsening the effect of oil increases on our purchasing power, while preventing our economies from modernizing and adapting to the post-oil era. But it will not be the first time that French politicians on the right and on the left will agree together to drag us in the wrong direction.
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by Christophe » 26/06/08, 13:47

New comment:

Laurent, I too have little hope that the CFTC will discover anything. In fact, I'm sure they will not find anything interesting because, as usual, the CFTC investigators will stubbornly look in the wrong direction to make sure they do not find anything ...

We must understand the announcement of this investigation for what it is, ie com. This is a message to US households to make them believe that the US government is acting for a drop in oil prices, while in fact, in monetary terms, it acts on the contrary for the rise.

Regarding price manipulation, yes it exists, as with all other commodities. In fact, there is rather less manipulation on oil today compared to other MPs, and this is precisely what gives this impression of "uncontrolled" rise in crude prices right now.

What the CFTC will not reveal is that the price of oil has been manipulated down for years by an agreement of several big traders. Until last summer, they managed pretty well to suppress the price of oil via a very large concentrated short position. The cartel eventually cracked for unknown reasons. A merchant bank probably felt the wind turning and pulled out of the market, resulting in a massive short covering of its buddies, which explains the very rapid price evolution.

That doesn't interest the CFTC, because it announced ahead of time that it was looking for manipulative "bad guys" to push up prices, not "good guys" to push prices down. And then that would oblige him to at least ask the question of the motive of this attempt to suppress the price of oil. However, as a government agency, it is not empowered to ask such questions ...

On the other hand, it appears from reports of investigations of the CFTC on other commodity markets that it does not consider the fact that a group of traders manipulates a market downwards via a very big short position. concentrated as a manipulation or as an illegal act ... So what? Since the CFTC has no interest in what is really going on in the oil market, their investigation will serve only to reassure the American consumer-elector.

@Christophe,
Regarding the new Iranian stock market and the choice of the Euro, we can honestly understand the Iranians ... Even if, as I said yesterday, the dollar also causes the euro in its fall, lose 18% of value per year on reserves in Euros is still less serious than losing 38% over the same period by storing dollars.

Every country in OPEC is strongly tempted to do the same thing, even though they are held for diplomatic reasons.

Beyond oil, in other commodity markets, there is also a strong temptation to switch to the Euro or the Ruble or even to stop exports altogether, as Vietnam did for rice.

It remains to be seen whether Iran will be followed quickly or not. It will probably be short-term by some pariah states like Venezuela or Ecuador, but that would not be enough to trigger an overall movement. I think most countries are waiting for a strong signal from the other great power before launching. All eyes are on China right now, which holds the destiny of the dollar in its hands and could take initiatives at the end of the Olympics. If China decides to sell its reserve of dollars, it is the whole financial and economic monetary system inherited from Bretton Woods that is screwed up, and so it will be time to rebuild something more effective.
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by Christophe » 26/06/08, 15:15

And a last comment from the author:

Author: Laurent Bourrelly
Comment:
@ Christophe: it's true that I hear vaguely about the abandonment of the euro for the dollar. On it, I can not give an opinion because I did not inquire. However, I have already heard the same conclusion as Scezda's comment. Once again, I suppose that the destiny of the dollar will not be played out in relation to economic issues, but political blabbering. To watch how the American leaders will lick the boots of the Chinese ...

@ Scezda: yet some scandals are updated. Not to mention Eron, which represents an exceptional case, there was fire on Wall Street until the third building of the World Trade Center collapsed the 9 / 11 / 01 with all the records of the investigation. inside. I have the impression that the Security and Exchange Commission is more persistent in revealing the cheats than the CFTC. Why is the CFTC and not the SC in charge of the oil case? Honestly, I do not know. Would the SC show a better willingness to denounce the guilty? I do not know either.
One thing is clear is that it cheats on all sides, but only a microscopic portion of the cheats is pursued. It's a bit like drug trafficking, we file some fish to the authorities to calm the populace, but the big slaughter continues in a global way without the slightest worry.
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by martien007 » 27/06/08, 00:17

Excellent article and comments : Idea:

I believe in these analyzes, but they will never be mentioned either on TF1 nor on FR2 or 3 ......

It is certain that there is trickery to make up for the losses due to the subprime fiasco, moreover no one speaks about these subprimes.

Scammed, manipulated one is very deep : Shock:

Oil continues its flight to 150 euros this summer, and yet nothing happens to change our lifestyles and transportation.

Moreover, N.Hulot pushed a "slight" rant on the effectiveness of the Grenelle environment this evening on France Info.
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by bham » 27/06/08, 09:47

And long live the Silver God! : Evil:

Frankly you think it's worth working all your life when you know all that ??
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by Christophe » 27/06/08, 10:09

Yes excellent, as I said on their blog, more than the postman is missing "Iranian oil exchange in euro".

More prosaically, I really fear this winter with L oil over 1 € ...

Many households will not be able to heat themselves ... so what will people and governments do?
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by martien007 » 27/06/08, 10:45

Christophe wrote:Yes excellent, as I said on their blog, more than the postman is missing "Iranian oil exchange in euro".

More prosaically, I really fear this winter with L oil over 1 € ...

Many households will not be able to heat themselves ... so what will people and governments do?


No problem, Boorlo will deliver "organic" fuel to them for free !!
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by Targol » 27/06/08, 10:59

Christophe wrote:More prosaically, I really fear this winter with L oil over 1 € ...

Many households will not be able to heat themselves ... so what will people and governments do?


People, constrained and forced, will revise their claims of "comfort" downwards and stop buying bullshit they don't NEED (as opposed to "WANT").
I think that, the more the purchasing power goes down, the more the expenses will focus on the products of 1ère necessity (food, clothes, heating, and gasoline to go to work).
Hi-tech products, travel around the world and leisure activities are likely to suffer a small crisis.

The problem will arise when a statistically significant (and electoral) part of the population will no longer be able to afford its vital needs.
The process is already underway ("Working poors", Sdf in increase, ...) but it is for the moment limited enough so that our leaders can treat it as negligible quantity.
For the moment, they leave the NGOs (restaurants of the heart, popular relief, Emaüs, etc ...) clean the Me ... !!!
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by SixK » 27/06/08, 11:17

Christophe wrote:More prosaically, I really fear this winter with L oil over 1 € ...

Many households will not be able to heat themselves ... so what will people and governments do?


People, they will put on sweaters and jackets. : Mrgreen:

And then they will start to think about "how they will be able to heat their home differently"

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