Saturday, April 17, 2010

More Incompetence

In my continuing crusade to demonstrate that our current corrupt and inept government isn’t worth fighting to defend or to save, I offer up the story of the first World Trade Center bombing.  In 1992, an uncle wired his nephew $660, and helped to send him and a friend to the United States.  Both the nephew and the friend had experience in terrorist training camps, and both were hardened Islamic extremists.  However, as we shall see, neither of the two were particularly smart, which means that they could have and should have been caught by the authorities before they ever had the chance to conceive of, assemble, park, and detonate a 1,500 pound urea nitrate-hydrogen gas bomb on the sub level of the World Trade Center’s North Tower.  


The uncle was Khalid Sheikh Mohammed, an Al Qaeda financier and money man.  The nephew was Ramzi Yousef, a native of the United Arab Emirates with a particular fondness for explosives.  Ramzi had a spotty record, given that he and his friends had almost gotten caught in the Philippines due to an unfortunate incident in which they nearly blew themselves up.  Ramzi was undaunted, however, so he and his friend Ahmed Ajaj boarded a plane in Peshawar, Pakistan, armed with bomb-making manuals, fake passports, altered passports, and various aliases that overlapped.  


On September 1, 1992, both men arrived at John F. Kennedy International Airport, ostensibly traveling separately.  Their grand nefarious scheme to prevent their mutual purpose in coming to the United States consisted of sitting apart on the airplane.  Ajaj had a Swedish passport in the name of Khurram Khan.  He had attained the passport from a fellow attendee at a terrorist camp on the Pakistan/Afghanistan border. In order to pass as Khurram Khan, Ajaj had taken a personal photo of himself and glued it with past over the picture of the actual Khurram Khan.  


With such sophisticated methods, and such cutting edge forged documents, Ajaj was stunned when he was detained by the INS for questioning and a search.  The INS search turned up bomb making manuals and videos, a Saudi passport, a Jordanian passport, a British passport in the name of Mohammed Azan, and letters documenting his attendance at various terror training camps.  Ajaj continued to holler that he was a Swedish journalist, even as the INS found a fake rubber stamp used to affix seals on Saudi passports.  


Yousef, on the other hand, managed to get off of the plane quietly.  Upon entry of the U.S., he jettisoned his secret identity as a British passenger and confessed to being an Iraqi.  He claimed to be entering the U.S. for the purposes of attaining political asylum.  The INS arrested Yousef, because he was entering the U.S. without a legitimate visa, which is a crime.  The INS began searching Yousef, and they found a boarding pass in the name of, you guessed it, Mohammed Azan.  The same name that was on the British passport in Ahmed Ajaj’s possession.  


Further searching revealed an I.D. from the al-Bunyan Islamic Center in Arizona, containing Yousef’s picture and another name: Khurram Khan.  The back of the I.D. was signed Ramzi Yousef.  It seemed the game was up.  Ahmed Ajaj’s altered Swedish passport was in the name of Khurram Khan.  At a certain point, Yousef began to talk to INS agent Martha Morales.  He confessed to being a native born son of the United Arab Emirates, which directly contradicted his earlier claim of being an Iraqi seeking political asylum.  Yousef further confessed to being a citizen of Pakistan.  Morales’s suspicions were raised, and she wanted to detain Yousef.  However, her supervisor refused to go along with Morales.  The detention center was full.  


And so, after being searched, and after confessing to entering the United States with false passports, no visa, and no clear identity, and having documents with the same aliases as those on the documents of Ahmed Ajaj, who was also in detention for the same reasons, along with those bomb making manuals and videos, Ramzi Yousef walked out of the INS facilities at JFK International Airport a free man.  He was given a hearing date to plead his case for political asylum.  He never showed up to the hearing.  He went to Jersey City and began rooming with his co-conspirator Mohammed Salameh. 


Ahmed Ajaj, on the other hand, was detained overnight, and eventually transferred to federal custody.  The INS had contacted the FBI and the ATF, with the net result being the former agency requesting that the files be sent over, and the latter agency indicating that it wasn’t interested.  As Ajaj awaited his fate in federal custody, he called the Big 5 hamburger restaurant in Dallas, where his uncle worked.  His uncle then engaged in something so cunning and so nefarious that it made the job of federal agents attempting to surveil the call extremely difficult: he patched the call through to Yousef via a three way call, and they all talked in Arabic.  The federal agents were aghast.  What to do?  


Sometimes, Yousef and Ajaj would even talk directly on the phone together, but because the conversation was in Arabic, a language so super-secret you can’t even go down to a Barnes and Noble and buy a piece of software which will teach you how to speak and understand Arabic, the federal authorities were completely hapless.  The entire situation was so perplexing to everyone involved that they didn’t even get around to translating the tapes they’d accrued until three days after the World Trade Center had been bombed.  


During this time, a federal judge by the name of Reena Raggi was overseeing the Ajaj case.  She ordered the bomb manuals released to Ajaj, for reasons that defy all comprehension and common sense.  Federal prosecutors and officials had no choice in the matter.  The manuals were turned back over to Ajaj, who alerted Yousef to the development in one of their phone calls, but told Yousef not to pick up the manuals himself.  After all, the agents surveilling them were top notch Americans.  They might ferret out the nefarious scheme and arrest those involved before they could blow up the World Trade Center.  So Yousef sent someone else, and the bomb making manuals were recovered by the terrorists, who proceeded to buy technical grade urea to begin the process of assembling their bomb.  


Nidal Ayyad and Mohammed Salameh opened a joint account together, as two terrorists in love with the destruction of infidels and the impure heathen are so wont to do, and they deposited $8,500 into the account.  On the same day, Salameh opened a separate account at the same banking institution, and a week later, he and Ayyad transferred the money to Salameh’s account.  Salameh and Yousef then procured the urea, the nitric acid, and the other components they’d need to build the bomb.  


They rented a ground level apartment at 40 Pampano in Jersey City, and proceeded to mix the urea, the nitric acid, and the other components to create the bomb.  Eventually, Nidal Ayyad ordered hydrogen gas in tanks, which would be used to add to the destructive force of the finished bomb.  When the components were ready, the group loaded a rented Ryder van with the bomb, and Mohammed Salameh constructed something of an alibi by reporting the van stolen.  


The conspirators then began the drive to the World Trade Center, arriving in the morning at the red parking lot of the B-2 parking garage.  At 12:18, the bomb detonated.  Six people died, and over a thousand were injured.  


All of this was preventable, but due to the total incompetence and cavalier indifference of the authorities within our government, a bomb plot mounted by two of the most incompetent individuals you could ever imagine succeeded.  The INS had both Ramzi Yousef and Ahmed Ajaj in custody, with overlapping aliases and forged documents, bomb making manuals and videos, and they failed to make the connection.  The FBI couldn’t be bothered to come down to the detention facility at the airport.  The ATF wasn’t interested.  


And to this day, not a single individual within the INS, the FBI, or the ATF was demoted, fired, or even censured for their failure to follow the policies, procedures, and laws which were already in place to prevent such attacks.  At the very least, the INS had a grounds for deporting both men.  The FBI had probable cause to investigate, as did the ATF.  Yet nothing of the sort ever took place.  


When you look at our government, and you think to yourself that its employees are on your side, and operating in your best interest, consider the above to be a note of caution.  Very often, the incompetence, ineptitude, and corruption within our government has tragic consequences for average Americans like you and I who go about our lives comfortably ensconced in the notion that our government and its agencies are doing everything they can, everything they should be doing, to protect us from threats foreign and domestic.  It goes beyond Hank Johnson talking about Guam tipping over due to overpopulation, or Alcee Hastings bluntly stating what should be obvious from the actions of Congress when he says that the rules are made up as they go along-it’s dangerous to our national security and to our own lives to tolerate this sort of rampant incompetence.  It’s unacceptable to settle for the classification of unprofessional and asinine behavior on the part of government officials and bureaucrats as merely a tragic component within an unforeseeable scenario.  


It’s not harsh to judge people for their failures, especially when those failures result in a loss of American life.  The terrorists bear the ultimate responsibility for their actions which killed innocent Americans; the government agencies and employees bear the penultimate responsibility for failing to utilize the resources and power of the most powerful nation on Earth to prevent such catastrophes from occurring in the first place.  

Culpability has to come.  Justice has to be done.  


Without accountability, tyranny has no fear.  Lest you think that civil liberties get in the way of law enforcement, consider the history of the FBI, which eavesdropped on Americans and foreign residents of America with impunity during the COINTELPRO operation.  They have the practical means at their disposal to catch peace activists in compromising positions, and to document the sex lives of public figures like Martin Luther King, Jr. and John F. Kennedy.  But when a bombing on U.S. soil occurs as a result of the actions of individuals who were arguably too incompetent to have justifiably gotten away with executing such a preventable plot, the FBI claims that the catastrophe was tragic and unforeseeable.  It was unimaginable, they say. Every government agency says the same.  


But it isn’t.  It isn’t unforeseeable to imagine that a foreign national with fake passports, bomb manuals, and bomb making videos, along with letters indicating his involvement in terrorist activity might actually be involved in something illegal or dangerous to American national security.  It isn’t unforeseeable that his fellow passenger, who possesses documents with the overlapping aliases, might be his co-conspirator.  What is unforeseeable to the American people is how their government could have failed to prevent something so obvious and so foreseeable from taking place.  


We deserve better and we can have better.  This November, get out and vote, and vote like the future of your country depends on it. Every election from November 2010 on should be an event of significance to each and every individual American.  Look at the reality of our government and our nation today and understand that this is the price of complacency in a democratic republic.  This is the price of assuming the best about your government.  You’re responsible for the country you hand to the next generation.  You’re responsible for maintaining the dream that is America, and so am I.  Let’s change our country and ensure that our government never again drags the rest of us in the wrong direction ever again.  Eternal urgency and vigilance are the price of freedom.  Be determined and optimistic.  The government may incompetent, but it’s only as incompetent as we allow it to be.  Don’t settle.  Insist on the best from yourself and from your government.  Let’s do this. 








Posted via email from momus1978's posterous

Friday, April 16, 2010

A Record of Incompetence and a Plea for Change

 

A Record of Incompetence and a Plea for Change

 

 

In the course of human events, and in particular within the course of my life, I’ve noticed a few things about bureaucracies and institutions. I’ve noticed a real condescension among public servants towards people they consider to be average. The truth of the matter is this: we’re not the bewildered herd, and most of us don’t need their interference in our lives.  We don’t need or require the sort of guidance they provide.  The only time we become a bewildered herd is when we take the government’s advice or input. 

 

We’re fully capable of balancing a checkbook and living within our means.  The problems of our society do not emanate among our ranks; they emanate among the ranks of bureaucrats.  They’re the ones who opened up the monetary supply to flood the credit markets with liquidity, knowing full well that every prior time they’d engaged in massive regulatory repeals and expansions of the monetary supply, disaster resulted.  Predictably enough, when they allow banks to inundate us with offer after offer (some 398.5 million just in Q4 of 2009, down from 668.1 million in Q4 of 2008) some of us will take on credit offers. When they set a precedent to credit card issuing banks that they’ll use taxpayer money to fund their overreach when they run into trouble as a result of the predictable delinquencies that occur, they exacerbate the problem.  

 

And let’s take a look at the wonders they have wrought, in all of their expertise: 

 

-$13 trillion in national debt, growing at a rate of $4.11 billion a day.  

 

http://www.usdebtclock.org/

 

 

-Nearly $2.5 trillion in IOUs to Social

 

http://www.washingtontimes.com/news/2010/mar/16/social-security-ious-stashed-away-in-wva/ 

 

 

-40 consecutive years of deficits, including those four years of surpluses where Social Security surpluses were borrowed to construct a mythical “surplus” during the Clinton Administration.  Here’s a hint: if you have to borrow or take on debt to balance your books, you don’t have a surplus.  

 

http://www.sbstatesman.com/2.870/the-clinton-surplus-myth-1.35974

http://www.fas.org/sgp/crs/RL31235.pdf

http://www.kowaldesign.com/budget/

 

 

-A tax code of some 3.7 million words, costing the American taxpayer and American businesses some $193 billion in order to maintain compliance. From 2001 to April 10, 2009, there had been 3,250 changes to the code, which equals out to over one a day. 

 

http://www.irs.gov/pub/irs-utl/08_tas_arc_msp_1.pdf 

http://online.wsj.com/article/SB123933106888707793.html

 

 

 

-Since 1853, the U.S. Postal Service has run a deficit every single year.  In the years where the Post Office was looking at a surplus, Congress fixed the issue by voting a pay raise to postal employees which ensured a deficit would occur.  

 

http://www.google.com/search?hl=en&safe=off&tbo=p&tbs=tl%3A1&q=history+of+post+office+deficits&btnG=Search&aq=f&aqi=&aql=&oq=history+of+post+office+deficits&gs_rfai=&aq=f&aqi=&aql=&oq=&gs_rfai=

 

 

-And in other news, despite a deficit of $199 million in 2000, the USPS paid out $197 million bonuses and proposed paying performance bonuses of 25% of salary for top managers in 2001 despite a $2 billion deficit.  

 

http://www.encyclopedia.com/doc/1P2-455173.html 

 

 

-A TARP bailout whose front end cost was $700 billion, but whose actual cost now includes $2.3 trillion offered by the FDIC, $7.4 trillion in TARP and other Treasury aid, and $7.2 trillion for Fannie Mae, Freddie Mac, credit unions, Veterans Affairs, and other assorted programs.  Then there’s the matter of $6.8 trillion offered by the Federal Reserve.  All told, that bailout of $700 billion may wind up costing U.S. taxpayers $23.5 trillion dollars according to Neil Barofsky, special inspector general for the Troubled Asset Relief Program.  That’s $23.5 trillion to bail out a mortgage market where total mortgages are valued at $21 trillion.  A fine record.  

http://www.bloomberg.com/apps/news?pid=20601087&sid=aY0tX8UysIaM 

 

-A purchase, using TARP funds, of stock in automobile companies Chrysler and General Motors without any statutory authorization whatsoever, given that the law creating TARP, the Emergency Economic Stabilization Act of 2008, says nothing about using TARP funds for automobile companies. Nothing. 

http://reason.com/blog/2009/06/08/is-the-chrysler-bankruptcy-dea 

 

 

-The purchase of a business which had a net worth of -$4.2 billion for $2 billion. That’s the real description of what the federal government did when it bought Chrysler.  

http://www.thefreemanonline.org/featured/political-bankruptcies-how-chrysler-and-gm-have-changed-the-rules-of-the-game/

 

-A projected loss of some $5.4 billion on the investment in Chrysler and GM of TARP funds.  GM is trading for around .75 per share.  

 

http://finance.yahoo.com/q?s=gm

 

 

 

-The violation of bankruptcy law in the purchase of GM and Chrysler stock, given that senior creditors have been reduced to junior status in that they will be compensated less than junior creditors and interests like unions.  

 

http://www.cnsnews.com/public/Content/article.aspx?RsrcID=49096

 

 

 

-Two wars, both of which are unpopular with the majority of the American people, and both of which have resulted in the installation of corrupt governments and will cost American taxpayers around $3 trillion.  

 

http://www.washingtonpost.com/wp-dyn/content/article/2008/03/07/AR2008030702846.html

 

 

-No capture, charges, indictments, or convictions of Osama bin Laden.  Years after his capture, Khalid Sheikh Mohammed has not been tried or convicted of any crime.  Despite the fact that the Taliban was prepared to capture and hand over Osama bin Laden in order to avoid removal from power, the U.S. government turned the offer down.  Osama bin Laden continues to release tapes live and direct from Pakistan outlining his views on the United States and what ought to be done to its citizens.

 

-In Afghanistan, a minimum of 10% of the Pentagon’s logistics contracts go towards payments to insurgents so that the Pentagon’s convoys won’t be attacked by those same insurgents.  The U.S. taxpayer is therefore paying money to the enemy our military is supposedly fighting in Afghanistan.  Estimates of the amount of money the Taliban makes off of such arrangements run as high as $1 billion a year.

 

http://www.amconmag.com/article/2009/nov/01/00020/ 

 

-A history of government abuse towards average citizens, including the FBI violating the very law it is sworn to uphold and enforce by engaging in illegal surveillance against citizens, during a fifteen year period between 1956 and 1971 under the COINTELPRO projects.  These sorts of acts have continued up to the current day, as the FBI has engaged in surveillance of subjects as varied as Veterans for Peace and PETA without warrants, or, for that matter, legal authority of any sort. 

 

http://www.icdc.com/~paulwolf/cointelpro/cointel.htm

http://www.pbs.org/now/politics/cointelpro.html

 

 

 

-Another example of government abuse include the government deciding to poison industrial alcohols during Prohibition, in order to poison drinkers of illicit hooch and thereby discourage their continued consumption of illegal spirits.  The program killed at least 10,000 American citizens who died as a direct result of their government’s decision to poison industrial alcohols without warning the larger population as to what they were doing.  In a very real sense, the government killed 10,000 of the citizens it existed to protect solely because they committed the capital offense of imbibing liquor. 

 

http://www.slate.com/id/2245188/ 

 

-The EPA authorized the testing of pesticides on humans, specifically foster children, as part of its rules on pesticide testing in humans, in 2006.  This follows a long history of human experimentation sanctioned by the U.S. government, including the infamous Tuskegee Syphilis Study, where the United States Public Health Service diagnosed 200 black men with syphilis and then observed the progression of the disease without offering treatment or even bothering to inform the subjects of the study that they had syphilis.  

 

Unfortunately, this sort of experimentation, as reprehensible as it is, goes on as a matter of routine in our society, as documented in the case of SFBC International Incorporated, which recruits immigrants and the poor to be part of drug studies.   Many of the immigrants in question simultaneously enroll in different studies to get as much money as possible, a practice which endangers their health and can corrupt the results of the studies. The government doesn’t have too much input or oversight, as it doesn’t tend to step on the feet of pharmaceutical companies, even the name of public safety.  

 

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aspHJ_sFen1s&refer=home-redirectoldpage

http://www.organicconsumers.org/articles/article_81.cfm

http://www.ahrp.org/cms/content/view/50/78/

 

-Elected representatives who know little about the law, and routinely evince a total disregard for the law when it obstructs their path to a desired result.  Examples include impeached federal judge Alcee Hastings, who now occupies a seat in House of Representatives as the Democratic representative of Florida’s 23rd district. Representative Hastings holds a seat on the Rules Committee, the irony of which ought to be evident given that his flagrant disregard for rules prohibiting bribery led to his impeachment as a judge.  He also told the truth in the lead up to the healthcare rules, albeit without purity of intent: there are no rules in Washington.  Expediency triumphs over rule and principle every time.  

 

 

 

Lest we think that such attitudes are the sole province of the Democrats, let us not forget that despite two Boland Amendments expressly prohibiting funding for the Contras, George H.W. Bush and his subordinate Oliver North pursued a program which traded arms and drugs for the express purpose of funding the Contras.  During the course of their operation, they operated out of Mena, Arkansas in partnership with a convicted drug dealer by the name of Adler Berriman Seal, also known as Barry Seal.  

 

Then there is the matter of now Vice President Joseph Biden of Delaware, who, as chairman of the Senate Judiciary Committee, attempted to offer up three interpretations of natural law in order to glean which interpretation fit nominee Clarence Thomas’s judicial outlook.  Trouble was, each of Biden’s interpretations was incorrect.  Thomas survived the hearing, and Biden went on to teach constitutional law at the Widener School of Law.  

 

Biden further managed to offer a mangled outlook on the office of vice president, during a conversation in which he incorrectly defined the vice president’s power to preside over the Senate as President as being limited to those times when there was a tie vote.  In truth, Article I, Section III, Clause IV says the following: 

 

“The Vice President of the United States shall be President of the Senate, but shall have no vote, unless they be equally divided.”

 

Here’s the constitutional role of the vice president, according to Joe Biden: 

 

“And the primary role of the vice president of the United States of America is to support the president of the United States of America, give that president his or her best judgment when sought, and as vice president, to preside over the Senate, only in a time when in fact there’s a tie vote.”  

 

This is a man who sat in judgement over nominees to the Supreme Court to determine whether or not they were fit to hold a seat as a Supreme Court justice, yet he has routinely demonstrated a lack of comprehension where the law, the Constitution, and basic history are concerned.  He’s now the Vice President, and perhaps he has realized after further investigation that the Vice President didn’t even have an office in the executive office building until the mid 20th century (http://hotair.com/archives/2008/10/03/biden-gaffe-vp-is-always-president-of-the-senate/).  Then there’s former Vice President Dan Quayle, who corrected the correct spelling of potato by amending it to include an e after the concluding o.  Therein lies the great problem with our government: the incompetence and ineptitude are bipartisan.  

 

 

These are just a smattering of the items I could point to to advance my central thesis: the problem in America is the government.  The government is incompetent, and corrupt in ways that strain credulity. The government has two things going for it: one, a public that is too damn busy straining to make a living due to the economic mismanagement of the government to really pay attention to the abuses of that government, and two, the fact that elections only take place every two years.  If the citizens get angry at the government, the government can count a substantial time period to elapse before public anger comes to bear. 

 

In general, officials from both parties behave with no regard for the effect of their policies on the general public, instead choosing to move the goalposts after the promised results of their newfangled initiatives never materialize.  One does not ever hear an official of the United States government simply apologize and admit that they were wrong. 

 

The Obama Administration claimed that the unemployment rate wouldn’t go above 8 percent if the stimulus was passed.  It went above 10% with the stimulus (http://www.bls.gov/news.release/pdf/empsit.pdf).  Then again, that’s the official unemployment rate, which doesn’t count everyone who’s really unemployed.    Moreover, it counts among the employed those government workers and military employees who will always be employed no matter what the economy does, and this has the added effect of padding the numbers.  With 154.1 million individuals in the labor force, the combined total of government employees numbers 19.734 million (http://www.data360.org/dsg.aspx?Data_Set_Group_Id=228).  

 

Now, when you take that number out of the 154 million, you’re left with around 134.5 million individuals in the labor force.  Now, factor in the official count of 15 million unemployed, and divide that by the 134.5 million, and you’ve got a more accurate official unemployment rate of 11.15%.  Then again, since the official number of unemployed doesn’t include individuals working part time jobs or individuals who have simply given up, the actual number is much, much higher.  We’re sitting on a time bomb of sorts, and no one in the government knows how to defuse it.  

 

Despite all of this, the government continues to pretend as though the economy is moving in the right direction.  Here’s the problem with that idea: in 13 months, the stock market has gone from 6,500 to 11,000, even though unemployment has remained high and jobs are scarce.  So where’s the economic expansion coming from?  Where’s the money? 

Well, let’s take a look.  We’re seeing great gains in healthcare stocks, as investors reacted to the news that the government would be forcing 32 million new customers into the marketplace regardless of whether or not they wanted to buy insurance of their own volition.  Oil stocks continue to trade high and gain, not because of increased demand, but instead because oil futures indicate the possibility of higher prices in the future.  This indicator has led to the stockpiling of huge amounts of oil in tank farms on land and in tankers anchored offshore.  In order to hedge for the potential of better prices in the future, oil traders are buying vast amounts of oil and storing them rather than bringing them to market.  The net effect of this activity is that with an artificially depressed availability of oil due to the withholding, oil prices are going up.  Gasoline prices are going up.  No one wants to call this for what it is: price manipulation.  

 

We’ve got over 321 million barrels of oil in reserve on land, and at least another 50 million barrels in storage on tankers anchored offshore. What’s more, if and when it becomes apparent that there is no real demand for oil due to the fact that no new demand in other industries exist due to a lack of viable consumers (unemployment leads to such a result) the likelihood of investors dumping the excess on the market and causing a crash in price which will reverberate throughout oil producing nations only increases. When those oil producing nations absorb the shock of such a dump, they’ll likely decrease production.  This will lead to a spike in prices, and the one thing you need during a real economic recovery is cheap and readily available energy, so any real economic recovery will likely be endangered and potentially stifled by such practices.  

 

Sources: 

http://seekingalpha.com/article/112685-commodities-story-of-the-year-floating-oil-storage 

http://www.heatingoil.com/blog/floating-storage-oil-products-continue-2010/ 

http://www.marketwatch.com/story/oil-storage-business-thriving-as-players-soc...

 

There is the myth that the demand for oil is rising, but the reality is that oil is only rising insofar as the price is tied to futures rather than the actual market price you see advertised on the ticker when you watch CNBC.  Think $37 a barrel in futures contracts, as opposed to the $80 a barrel you see advertised.  And that oil goes right into a tank farm or a tanker to be stored for when the price rises and a huge yield can be realized.  Moreover, by denying available supply to the market, the traders and speculators are driving up the price and providing a disincentive for producers to recognize the market’s real condition in order to drive production down to a level commensurate with real demand.  It’s more than unfair or anti-capitalistic; it’s dangerous.  

 

If one element or variable within the complicated chain goes awry, the market could be thrown into utter chaos.  The suppliers and producers could face insolvency; the customers could face shortages of available supply.  All of this is not because of the market, but because individuals and groups have been allowed to subvert the market by rigging futures prices.  It’s deceit and subterfuge, plain and simple.  What is so uncertain about the matter is that the 371 million barrels constitutes what we know.  There are always unknowns, existing beyond the pale and beyond the discernment of the market and its participants, X-factors whose emergence could complicate factors tremendously in a potential crisis.  

 

The simple truth is this: economically speaking, for everything that you see, there is something larger that you do not see.  Like an iceberg, the visible truth is never the larger element of the whole.  Submerged beneath the surface is something much larger, and the edges of that larger reality only gradually come into focus, and the majority those affected will only see the larger reality after it is too late to do anything to adapt to the consequences.  An oncoming train appears small in the distance, its lights just a dot on the horizon, and yet it is much larger than initial perception would indicate. 

 

(For an example of unseen or uncertain realities, see the following link: http://blogs.ft.com/energy-source/2010/03/19/whats-in-an-oil-storage-data-flaw/)

 

 

 

The best observers and prognosticators within economics have only a dim light to guide them to the truth in an abyss of dark uncertainty.  Economics is not so much a pseudo-science as it is an inexact science.  What economics can do is make observations about what is evident in order to draw correlations between elements and variables.  But to draw causality on a grand scale out of microcosmic relationships between individual variables in a system of staggering complexity is a fool’s errand.  Human behavior cannot be quantified with complete certainty.  The problem with any equation which purports to quantify human behavior with mathematical exactitude or precision is that one of its variables constitutes a sort of anti-constant: humans are not entirely consistent or rational, and the systems arising out of their interactions tend to reflect this.  

 

Moreover, the men who construct such equations, functions, and formulas are themselves human beings, actors caught up in the drama around them.  They are not impartial, nor do they exist within a vantage point that affords them distance from the din.  They will be influenced, and to an extent, they will be blinded by the events around them.  What we can say with certainty is that human beings will seek profit and gain, but we cannot say with any certainty whether or not they will pursue effective means which will lead to their desired goal.  The makers of New Coke thought they had a sure thing, as did the minds behind Pepsi Clear.  

 

To a degree, this is the problem of the government as well.  The government predicates its actions on an abiding sense of optimism as to its ability to know certain things.  The most optimistic people you’ll ever meet are in politics.  They believe in themselves, even if you and I do not.  Even if they’ve had an abysmal record of failure, and there are mountains of empirical and anecdotal evidence to suggest otherwise, the bureaucrats and elected officials of our government will believe in the efficacy of a second chance to get it right where they previously got it wrong.  Public service consists of an infinity of second chances, and a perspective which affords one the luxury of being oblivious in most instances as to the disastrous consequences of bad public policy.  Everything in Washington is geared towards affirmation and confirmation.  

 

There are even times when a crumbling path or bridge produces a desired result, only to collapse beneath the feet of the men and women who put their faith in the path’s continued strength.   Take collateralized debt obligations, which have produced billions if not trillions in profits, but represent the most intellectually bankrupt devices ever constructed in the history of business.  Simply put, they have no connection whatsoever to reality.  

 

The fact that the delusion is one shared by the overwhelming majority does not excuse it from qualification as a delusion.  Allow me to demonstrate to you what a collateralized debt obligation actually is in the way of a small illustration.  We have a homeless individual, torn and tattered, in ragged clothes, and he’s wandering the Las Vegas strip.  He’s hungry, he doesn’t have much money at all, certainly not enough to get the full measure he needs to address just the basic needs of life.  He has to choose between food and medicine at times.  Sometimes he foregoes both options out of a lack of means.  

 

He wanders into a glittering casino off of the strip, somehow eluding the valets and security guards posted at the doors.  No one impedes his progress.  He makes it to the casino floor, where he is spotted by a pit boss.  The pit boss excitedly calls the casino manager, and they both approach the hobo.  A security guard accompanies them.  Instead of ushering the hobo out the door and onto the street, the casino manager offers him a $1 million marker.  The hobo, stunned, accepts. As the casino ushers him to a blackjack table, a waitress offers the newly minted VIP a drink and some food.  He accepts, albeit in a bewildered and even dazed fashion.  

 

He begins gambling, and the rest of the patrons start to notice him and they begin whispering and pointing.  They wander over to his table, not to observe, but to bet on his bets.  They effectively begin wagering amongst themselves as to whether or not he’ll hit 21.  The casino begins taking their bets, and what’s more, a few individuals in the crowd are actually insurance company executives and salesmen in town for a convention.  They begin writing and issuing policies for the other patrons to cover them in the event in of a loss.  

 

For a while, it appears that great amounts of money are being made.  Some, perhaps a majority, of those betting on the hobo’s bets are making tremendous amounts of money.  The insurance salesmen and executives have so much cash coming in for their policies that they have to rent a money cart from casino manager.  More and more people begin coming into the casino, until it’s packed out.  The slot machines, the poker tables, and the craps tables are all empty. Everyone is betting on the bets of the hobo, and everyone is buying insurance to hedge against their potential losses.  It seems as though everyone is making out.  

 

The insurance folks begin to set aside a portion of their vast amounts of money as a reserve to payout any policies they’ve issue, but the vast majority of their money is being bet on the hobo’s progress as well. Suddenly, the hobo begins losing.  He begins to lose and lose and lose. He loses until he has nothing left.  There’s an element within  the casino that bet the house rules and won big.  But the vast majority of those present bet on the hobo being able to defy the overwhelming odds and succeed.  

 

The casino manager comes to the hobo’s side, and places his hand on the shoulder of the hobo as if to console him.  He then leans down and whispers in his ear that it’s time to settle up.  The hobo looks up at the face of the casino manager, shocked.  “I don’t have anything to settle up with,” he says hoarsely.  The casino manager’s face turns red, and his tone becomes insistent.  The hobo repeats his claim, but the casino manager seems unable to comprehend what has taken place.  

 

In the meantime, another drama is taking place in the crowd. The patrons have all come to the insurance folks, hands outstretched.  They’re insured against such losses, so they aren’t worried.  But the insurers gambled the majority of their yields on the success of the hobo, so they only have a small percentage on hand to cover any losses by their policyholders.  

 

Everyone is stunned to realize what is going on.  The tones become accusatory, the police are called, and it seems as though nearly everyone is facing ruin.  

 

Now, let’s finish our little analogy: the hobo is a subprime borrower, the casino manager is his lender, and the blackjack table is his house, the value of which fluctuated wildly over the course of time.  The other patrons are investment banks, hedge funds, pension funds, and the assorted other individuals who bought collateralized debt obligations made up of the mortgages of subprime borrowers.  The insurance guys in town for the convention are AIG and other companies who sold credit default swaps as a form of insurance against losses in the mortgage securities market.  

 

Common sense would tell a casino manager not to give a hobo a $1 million marker, or a mortgage officer to extend a $400,000 mortgage to an individual making $40,000 a year as a librarian.  Decency would tell a mortgage officer or a bank official not to fudge the income of the librarian applying for a mortgage loan.  But in life, as in a casino, decency and common sense are suspended for the promise of easy riches won on the turn of a chance.  

 

But in the end, as the civil authorities are called in, the patrons all turn to their government, looking for deus ex machina.  Somebody better fix this, or otherwise we’ll remember that our government could have prevented it in the first place.  The patrons all look to the government, and the government then picks their pockets and the pockets of pedestrians out on the sidewalk outside of the casino to make up the difference.  A lot of rhetoric is spouted, some hearings are held, a few individuals pontificate at great length about how ridiculous it all was, and how wrong it is that some individuals made a great deal of money out of moral hazard by betting on common sense and overwhelming odds.  In the end, nothing is done to prevent the same thing from recurring all over again.  The casino lays off a good many of its employees to make up for its losses, and a good many of the pedestrians outside the casino who find their pockets emptied as a result of the fiasco suddenly cut back on their own discretionary spending.  Like dominoes, they all fall.  No man is an island, and our actions have consequences not just for ourselves, but for others as well.  Most of us realize this and order our affairs and actions accordingly.  But even those of us who act responsibly and live within restraints find ourselves unable to borrow, unable to keep steady work, unable to rely on steady demand for our business as our customers also face the consequences of the exorbitant gambles of a select few who went to the casino one night and made some really stupid, stupid, stupid choices.  Or, in the case of the recent economic crisis, a select few banks and hedge funds went to the casino night in and night out to make really stupid choices over and over again.  

 

And right now, as it seems that we’ve passed the low point of the crisis, we’d do well to realize that anyone can get past anything with $23.5 trillion in loans, guarantees, and outright gifts. I posit to you that every positive economic barometer of the past twelve months has been due to nothing more than bailout money in its various forms. Give anyone that kind of money, and they can drive a market through the roof.  In thirteen months, we’ve driven the market from a record low to near record highs.  But it isn’t real.  

 

There is no such thing as a jobless recovery.  Anyone who tells you otherwise is a trader or a speculator.  What is so absurd about the theater playing out in front of the American public is this: we’re unemployed or underemployed, we’re insolvent, and we’re so indebted as to defy comprehension, and that’s the average American.  No one in this country has been entirely responsible where credit card debt is concerned, especially when you consider that the average household now carries some $16,000 in credit card indebtedness (http://www.creditcards.com/credit-card-news/credit-card-industry-facts-personal-debt-statistics-1276.php). 

 

All of this is a direct result of government regulation, which encourages indebtedness.  After September 11th, what were the first words out of President Bush’s mouth? Go shopping. That may seem a little harsh, but it’s essentially what we were encouraged to do by our President.  

 

With a monopoly control over the nation’s monetary supply, the Federal Reserve drives indebtedness by flooding the market with levels of liquidity that cannot possibly be absorbed by business or prime borrowers.  At a certain point, it is academic to glean from the liquidity level that the Federal Reserve is encouraging banks to lend to high risk customers.  Then again, banks aren’t doing that now, even with record levels of liquidity.  Why? They’re investing.  

 

The primary function of a bank in America these days is not to lend; it is instead to invest in the market.  Market volume reflects this.  People aren’t investing new businesses or new stocks in a broad based way, because they can’t get credit to do it.  

However, the market is still exploding upwards.  The direct participants in that market are the entities that used to issue credit.  They’re using the liquidity to reap artificial yields from a market that is now flush with their government issued liquidity demand.  The market volume, narrow as it is, tells us that this is the truth.  

 

But what happens when the liquidity tsunami recedes?  Like all big waves, what it carries back out with it to sea is often significantly detrimental to those fortunate enough to survive on shore.  In short, if you think the bubble which led to the recent collapse was big, just wait until the current bubble deflates.  You cannot begin to fathom what a $23.5 trillion bubble looks like on collapse.  

 

But what is more, you cannot begin to comprehend what the collapse of a mortgage market will do to the markets which rest upon it as a foundation.  The market I’m speaking of is the collateralized debt obligation market, which sits at over $1.14 quadrillion. A collapse of one percent of that market would constitute a collapse in dollars on par with three quarters of overall U.S. economy.  

 

As I have repeatedly noted, this is a situation of the government’s devising.  It is vital, even imperative, that we take back the government in November.  It is a matter of national security.  You cannot merely say that you believe that every member of Congress should be turned out of office, but then reserve a lesser judgement for your own senator or representative.  They all have to go.  Every single one of them has to be turned out, and we have to build towards a total overthrow of our government through the electoral process.  

 

You can’t think within the same tired paradigms you’ve thought in previously.  You can’t be a yellow dog Republican or a yellow dog Democrat.  The country can’t afford a continuation of the status quo.  You’re going to have to vote out of your comfort zone in order to send a message.  You have to vote anti-incumbent.  You have to vote yellow dog American, and you have to realize that the future of this country depends on wholesale change within the the next three elections.  It’s that simple.  

 

It’s about momentum, and it’s about sustaining urgency in Washington.  Incumbents by their very nature suspend urgency after an election.  Re-election will not result in the sort of substantive change that is required in our current circumstance.  There is no other way.  

Posted via web from momus1978's posterous

A Record of Incompetence and a Plea for Change


A Record of Incompetence and a Plea for Change



In the course of human events, and in particular within the course of my life, I’ve noticed a few things about bureaucracies and institutions. I’ve noticed a real condescension among public servants towards people they consider to be average. The truth of the matter is this: we’re not the bewildered herd, and most of us don’t need their interference in our lives.  We don’t need or require the sort of guidance they provide.  The only time we become a bewildered herd is when we take the government’s advice or input. 


We’re fully capable of balancing a checkbook and living within our means.  The problems of our society do not emanate among our ranks; they emanate among the ranks of bureaucrats.  They’re the ones who opened up the monetary supply to flood the credit markets with liquidity, knowing full well that every prior time they’d engaged in massive regulatory repeals and expansions of the monetary supply, disaster resulted.  Predictably enough, when they allow banks to inundate us with offer after offer (some 398.5 million just in Q4 of 2009, down from 668.1 million in Q4 of 2008) some of us will take on credit offers. When they set a precedent to credit card issuing banks that they’ll use taxpayer money to fund their overreach when they run into trouble as a result of the predictable delinquencies that occur, they exacerbate the problem.  


And let’s take a look at the wonders they have wrought, in all of their expertise: 


-$13 trillion in national debt, growing at a rate of $4.11 billion a day.  


http://www.usdebtclock.org/



-Nearly $2.5 trillion in IOUs to Social


http://www.washingtontimes.com/news/2010/mar/16/social-security-ious-stashed-away-in-wva/ 



-40 consecutive years of deficits, including those four years of surpluses where Social Security surpluses were borrowed to construct a mythical “surplus” during the Clinton Administration.  Here’s a hint: if you have to borrow or take on debt to balance your books, you don’t have a surplus.  


http://www.sbstatesman.com/2.870/the-clinton-surplus-myth-1.35974

http://www.fas.org/sgp/crs/RL31235.pdf

http://www.kowaldesign.com/budget/



-A tax code of some 3.7 million words, costing the American taxpayer and American businesses some $193 billion in order to maintain compliance. From 2001 to April 10, 2009, there had been 3,250 changes to the code, which equals out to over one a day. 


http://www.irs.gov/pub/irs-utl/08_tas_arc_msp_1.pdf 

http://online.wsj.com/article/SB123933106888707793.html




-Since 1853, the U.S. Postal Service has run a deficit every single year.  In the years where the Post Office was looking at a surplus, Congress fixed the issue by voting a pay raise to postal employees which ensured a deficit would occur.  


http://www.google.com/search?hl=en&safe=off&tbo=p&tbs=tl%3A1&q=history+of+post+office+deficits&btnG=Search&aq=f&aqi=&aql=&oq=history+of+post+office+deficits&gs_rfai=&aq=f&aqi=&aql=&oq=&gs_rfai=



-And in other news, despite a deficit of $199 million in 2000, the USPS paid out $197 million bonuses and proposed paying performance bonuses of 25% of salary for top managers in 2001 despite a $2 billion deficit.  


http://www.encyclopedia.com/doc/1P2-455173.html 



-A TARP bailout whose front end cost was $700 billion, but whose actual cost now includes $2.3 trillion offered by the FDIC, $7.4 trillion in TARP and other Treasury aid, and $7.2 trillion for Fannie Mae, Freddie Mac, credit unions, Veterans Affairs, and other assorted programs.  Then there’s the matter of $6.8 trillion offered by the Federal Reserve.  All told, that bailout of $700 billion may wind up costing U.S. taxpayers $23.5 trillion dollars according to Neil Barofsky, special inspector general for the Troubled Asset Relief Program.  That’s $23.5 trillion to bail out a mortgage market where total mortgages are valued at $21 trillion.  A fine record.  

http://www.bloomberg.com/apps/news?pid=20601087&sid=aY0tX8UysIaM 


-A purchase, using TARP funds, of stock in automobile companies Chrysler and General Motors without any statutory authorization whatsoever, given that the law creating TARP, the Emergency Economic Stabilization Act of 2008, says nothing about using TARP funds for automobile companies. Nothing. 

http://reason.com/blog/2009/06/08/is-the-chrysler-bankruptcy-dea 



-The purchase of a business which had a net worth of -$4.2 billion for $2 billion. That’s the real description of what the federal government did when it bought Chrysler.  

http://www.thefreemanonline.org/featured/political-bankruptcies-how-chrysler-and-gm-have-changed-the-rules-of-the-game/


-A projected loss of some $5.4 billion on the investment in Chrysler and GM of TARP funds.  GM is trading for around .75 per share.  


http://finance.yahoo.com/q?s=gm




-The violation of bankruptcy law in the purchase of GM and Chrysler stock, given that senior creditors have been reduced to junior status in that they will be compensated less than junior creditors and interests like unions.  


http://www.cnsnews.com/public/Content/article.aspx?RsrcID=49096




-Two wars, both of which are unpopular with the majority of the American people, and both of which have resulted in the installation of corrupt governments and will cost American taxpayers around $3 trillion.  


http://www.washingtonpost.com/wp-dyn/content/article/2008/03/07/AR2008030702846.html



-No capture, charges, indictments, or convictions of Osama bin Laden.  Years after his capture, Khalid Sheikh Mohammed has not been tried or convicted of any crime.  Despite the fact that the Taliban was prepared to capture and hand over Osama bin Laden in order to avoid removal from power, the U.S. government turned the offer down.  Osama bin Laden continues to release tapes live and direct from Pakistan outlining his views on the United States and what ought to be done to its citizens.


-In Afghanistan, a minimum of 10% of the Pentagon’s logistics contracts go towards payments to insurgents so that the Pentagon’s convoys won’t be attacked by those same insurgents.  The U.S. taxpayer is therefore paying money to the enemy our military is supposedly fighting in Afghanistan.  Estimates of the amount of money the Taliban makes off of such arrangements run as high as $1 billion a year.


http://www.amconmag.com/article/2009/nov/01/00020/ 


-A history of government abuse towards average citizens, including the FBI violating the very law it is sworn to uphold and enforce by engaging in illegal surveillance against citizens, during a fifteen year period between 1956 and 1971 under the COINTELPRO projects.  These sorts of acts have continued up to the current day, as the FBI has engaged in surveillance of subjects as varied as Veterans for Peace and PETA without warrants, or, for that matter, legal authority of any sort. 


http://www.icdc.com/~paulwolf/cointelpro/cointel.htm

http://www.pbs.org/now/politics/cointelpro.html




-Another example of government abuse include the government deciding to poison industrial alcohols during Prohibition, in order to poison drinkers of illicit hooch and thereby discourage their continued consumption of illegal spirits.  The program killed at least 10,000 American citizens who died as a direct result of their government’s decision to poison industrial alcohols without warning the larger population as to what they were doing.  In a very real sense, the government killed 10,000 of the citizens it existed to protect solely because they committed the capital offense of imbibing liquor. 


http://www.slate.com/id/2245188/ 


-The EPA authorized the testing of pesticides on humans, specifically foster children, as part of its rules on pesticide testing in humans, in 2006.  This follows a long history of human experimentation sanctioned by the U.S. government, including the infamous Tuskegee Syphilis Study, where the United States Public Health Service diagnosed 200 black men with syphilis and then observed the progression of the disease without offering treatment or even bothering to inform the subjects of the study that they had syphilis.  


Unfortunately, this sort of experimentation, as reprehensible as it is, goes on as a matter of routine in our society, as documented in the case of SFBC International Incorporated, which recruits immigrants and the poor to be part of drug studies.   Many of the immigrants in question simultaneously enroll in different studies to get as much money as possible, a practice which endangers their health and can corrupt the results of the studies. The government doesn’t have too much input or oversight, as it doesn’t tend to step on the feet of pharmaceutical companies, even the name of public safety.  


http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aspHJ_sFen1s&refer=home-redirectoldpage

http://www.organicconsumers.org/articles/article_81.cfm

http://www.ahrp.org/cms/content/view/50/78/


-Elected representatives who know little about the law, and routinely evince a total disregard for the law when it obstructs their path to a desired result.  Examples include impeached federal judge Alcee Hastings, who now occupies a seat in House of Representatives as the Democratic representative of Florida’s 23rd district. Representative Hastings holds a seat on the Rules Committee, the irony of which ought to be evident given that his flagrant disregard for rules prohibiting bribery led to his impeachment as a judge.  He also told the truth in the lead up to the healthcare rules, albeit without purity of intent: there are no rules in Washington.  Expediency triumphs over rule and principle every time.  




Lest we think that such attitudes are the sole province of the Democrats, let us not forget that despite two Boland Amendments expressly prohibiting funding for the Contras, George H.W. Bush and his subordinate Oliver North pursued a program which traded arms and drugs for the express purpose of funding the Contras.  During the course of their operation, they operated out of Mena, Arkansas in partnership with a convicted drug dealer by the name of Adler Berriman Seal, also known as Barry Seal.  


Then there is the matter of now Vice President Joseph Biden of Delaware, who, as chairman of the Senate Judiciary Committee, attempted to offer up three interpretations of natural law in order to glean which interpretation fit nominee Clarence Thomas’s judicial outlook.  Trouble was, each of Biden’s interpretations was incorrect.  Thomas survived the hearing, and Biden went on to teach constitutional law at the Widener School of Law.  


Biden further managed to offer a mangled outlook on the office of vice president, during a conversation in which he incorrectly defined the vice president’s power to preside over the Senate as President as being limited to those times when there was a tie vote.  In truth, Article I, Section III, Clause IV says the following: 


“The Vice President of the United States shall be President of the Senate, but shall have no vote, unless they be equally divided.”


Here’s the constitutional role of the vice president, according to Joe Biden: 


“And the primary role of the vice president of the United States of America is to support the president of the United States of America, give that president his or her best judgment when sought, and as vice president, to preside over the Senate, only in a time when in fact there’s a tie vote.”  


This is a man who sat in judgement over nominees to the Supreme Court to determine whether or not they were fit to hold a seat as a Supreme Court justice, yet he has routinely demonstrated a lack of comprehension where the law, the Constitution, and basic history are concerned.  He’s now the Vice President, and perhaps he has realized after further investigation that the Vice President didn’t even have an office in the executive office building until the mid 20th century (http://hotair.com/archives/2008/10/03/biden-gaffe-vp-is-always-president-of-the-senate/).  Then there’s former Vice President Dan Quayle, who corrected the correct spelling of potato by amending it to include an e after the concluding o.  Therein lies the great problem with our government: the incompetence and ineptitude are bipartisan.  



These are just a smattering of the items I could point to to advance my central thesis: the problem in America is the government.  The government is incompetent, and corrupt in ways that strain credulity. The government has two things going for it: one, a public that is too damn busy straining to make a living due to the economic mismanagement of the government to really pay attention to the abuses of that government, and two, the fact that elections only take place every two years.  If the citizens get angry at the government, the government can count a substantial time period to elapse before public anger comes to bear. 


In general, officials from both parties behave with no regard for the effect of their policies on the general public, instead choosing to move the goalposts after the promised results of their newfangled initiatives never materialize.  One does not ever hear an official of the United States government simply apologize and admit that they were wrong. 


The Obama Administration claimed that the unemployment rate wouldn’t go above 8 percent if the stimulus was passed.  It went above 10% with the stimulus (http://www.bls.gov/news.release/pdf/empsit.pdf).  Then again, that’s the official unemployment rate, which doesn’t count everyone who’s really unemployed.    Moreover, it counts among the employed those government workers and military employees who will always be employed no matter what the economy does, and this has the added effect of padding the numbers.  With 154.1 million individuals in the labor force, the combined total of government employees numbers 19.734 million (http://www.data360.org/dsg.aspx?Data_Set_Group_Id=228).  


Now, when you take that number out of the 154 million, you’re left with around 134.5 million individuals in the labor force.  Now, factor in the official count of 15 million unemployed, and divide that by the 134.5 million, and you’ve got a more accurate official unemployment rate of 11.15%.  Then again, since the official number of unemployed doesn’t include individuals working part time jobs or individuals who have simply given up, the actual number is much, much higher.  We’re sitting on a time bomb of sorts, and no one in the government knows how to defuse it.  


Despite all of this, the government continues to pretend as though the economy is moving in the right direction.  Here’s the problem with that idea: in 13 months, the stock market has gone from 6,500 to 11,000, even though unemployment has remained high and jobs are scarce.  So where’s the economic expansion coming from?  Where’s the money? 

Well, let’s take a look.  We’re seeing great gains in healthcare stocks, as investors reacted to the news that the government would be forcing 32 million new customers into the marketplace regardless of whether or not they wanted to buy insurance of their own volition.  Oil stocks continue to trade high and gain, not because of increased demand, but instead because oil futures indicate the possibility of higher prices in the future.  This indicator has led to the stockpiling of huge amounts of oil in tank farms on land and in tankers anchored offshore.  In order to hedge for the potential of better prices in the future, oil traders are buying vast amounts of oil and storing them rather than bringing them to market.  The net effect of this activity is that with an artificially depressed availability of oil due to the withholding, oil prices are going up.  Gasoline prices are going up.  No one wants to call this for what it is: price manipulation.  


We’ve got over 321 million barrels of oil in reserve on land, and at least another 50 million barrels in storage on tankers anchored offshore. What’s more, if and when it becomes apparent that there is no real demand for oil due to the fact that no new demand in other industries exist due to a lack of viable consumers (unemployment leads to such a result) the likelihood of investors dumping the excess on the market and causing a crash in price which will reverberate throughout oil producing nations only increases. When those oil producing nations absorb the shock of such a dump, they’ll likely decrease production.  This will lead to a spike in prices, and the one thing you need during a real economic recovery is cheap and readily available energy, so any real economic recovery will likely be endangered and potentially stifled by such practices.  


Sources: 

http://seekingalpha.com/article/112685-commodities-story-of-the-year-floating-oil-storage

http://www.heatingoil.com/blog/floating-storage-oil-products-continue-2010/

http://www.marketwatch.com/story/oil-storage-business-thriving-as-players-soc... 


There is the myth that the demand for oil is rising, but the reality is that oil is only rising insofar as the price is tied to futures rather than the actual market price you see advertised on the ticker when you watch CNBC.  Think $37 a barrel in futures contracts, as opposed to the $80 a barrel you see advertised.  And that oil goes right into a tank farm or a tanker to be stored for when the price rises and a huge yield can be realized.  Moreover, by denying available supply to the market, the traders and speculators are driving up the price and providing a disincentive for producers to recognize the market’s real condition in order to drive production down to a level commensurate with real demand.  It’s more than unfair or anti-capitalistic; it’s dangerous.  


If one element or variable within the complicated chain goes awry, the market could be thrown into utter chaos.  The suppliers and producers could face insolvency; the customers could face shortages of available supply.  All of this is not because of the market, but because individuals and groups have been allowed to subvert the market by rigging futures prices.  It’s deceit and subterfuge, plain and simple.  What is so uncertain about the matter is that the 371 million barrels constitutes what we know.  There are always unknowns, existing beyond the pale and beyond the discernment of the market and its participants, X-factors whose emergence could complicate factors tremendously in a potential crisis.  


The simple truth is this: economically speaking, for everything that you see, there is something larger that you do not see.  Like an iceberg, the visible truth is never the larger element of the whole.  Submerged beneath the surface is something much larger, and the edges of that larger reality only gradually come into focus, and the majority those affected will only see the larger reality after it is too late to do anything to adapt to the consequences.  An oncoming train appears small in the distance, its lights just a dot on the horizon, and yet it is much larger than initial perception would indicate. 


(For an example of unseen or uncertain realities, see the following link: http://blogs.ft.com/energy-source/2010/03/19/whats-in-an-oil-storage-data-flaw/)




The best observers and prognosticators within economics have only a dim light to guide them to the truth in an abyss of dark uncertainty.  Economics is not so much a pseudo-science as it is an inexact science.  What economics can do is make observations about what is evident in order to draw correlations between elements and variables.  But to draw causality on a grand scale out of microcosmic relationships between individual variables in a system of staggering complexity is a fool’s errand.  Human behavior cannot be quantified with complete certainty.  The problem with any equation which purports to quantify human behavior with mathematical exactitude or precision is that one of its variables constitutes a sort of anti-constant: humans are not entirely consistent or rational, and the systems arising out of their interactions tend to reflect this.  


Moreover, the men who construct such equations, functions, and formulas are themselves human beings, actors caught up in the drama around them.  They are not impartial, nor do they exist within a vantage point that affords them distance from the din.  They will be influenced, and to an extent, they will be blinded by the events around them.  What we can say with certainty is that human beings will seek profit and gain, but we cannot say with any certainty whether or not they will pursue effective means which will lead to their desired goal.  The makers of New Coke thought they had a sure thing, as did the minds behind Pepsi Clear.  


To a degree, this is the problem of the government as well.  The government predicates its actions on an abiding sense of optimism as to its ability to know certain things.  The most optimistic people you’ll ever meet are in politics.  They believe in themselves, even if you and I do not.  Even if they’ve had an abysmal record of failure, and there are mountains of empirical and anecdotal evidence to suggest otherwise, the bureaucrats and elected officials of our government will believe in the efficacy of a second chance to get it right where they previously got it wrong.  Public service consists of an infinity of second chances, and a perspective which affords one the luxury of being oblivious in most instances as to the disastrous consequences of bad public policy.  Everything in Washington is geared towards affirmation and confirmation.  


There are even times when a crumbling path or bridge produces a desired result, only to collapse beneath the feet of the men and women who put their faith in the path’s continued strength.   Take collateralized debt obligations, which have produced billions if not trillions in profits, but represent the most intellectually bankrupt devices ever constructed in the history of business.  Simply put, they have no connection whatsoever to reality.  


The fact that the delusion is one shared by the overwhelming majority does not excuse it from qualification as a delusion.  Allow me to demonstrate to you what a collateralized debt obligation actually is in the way of a small illustration.  We have a homeless individual, torn and tattered, in ragged clothes, and he’s wandering the Las Vegas strip.  He’s hungry, he doesn’t have much money at all, certainly not enough to get the full measure he needs to address just the basic needs of life.  He has to choose between food and medicine at times.  Sometimes he foregoes both options out of a lack of means.  


He wanders into a glittering casino off of the strip, somehow eluding the valets and security guards posted at the doors.  No one impedes his progress.  He makes it to the casino floor, where he is spotted by a pit boss.  The pit boss excitedly calls the casino manager, and they both approach the hobo.  A security guard accompanies them.  Instead of ushering the hobo out the door and onto the street, t

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