From the "No Shit, Sherlock" files comes this deft little booger of insight. The Washington Post has discovered that there's no real logical or economic basis for the explosion of oil prices. "The market is once again searching for a new equilibrium" said a report from Goldman Sachs. The equilibrium referenced is not the usual market forces of supply and demand, but rather the break point where people are moved to violence or outright theft. Around the Ares and Athena campfire we call this a "because we can" application of pricing.
I'm certainly no economist or expert on commodities valuation, but something has definitely changed in the last decade. There appears to be a heard of investment capital that has moved from commodity to commodity. The unifying thread in the movement is that the commodities are staples that consumers have little choice about consuming. It started with an intensive push for deregulation of portions of the power industry in the 90's. This resulted in criminal-level graft in California. (A sitting governor was deposed and the state was economically knee-capped at a cost a few indictments and hand slap fines.) This was followed closely by the absurd run-up in housing prices. Housing will have to retreat quite a bit further before it will be affordable to the average American again. Now we're a few years into a speculative frenzy concerning oil. The hedge fund alarmists have constructed a theater of imagination where any uttered disturbance is cause for increase in price. Favorite examples of the past few years have been rockets fired at oil tankers, forecasts of hurricanes in the Gulf of Mexico, a rebel attack on a refinery in Nigeria, and any statement by anyone in Iran. None of these actually result in a supply reduction, but the the downrange facts have no place among current shakes of the Magic 8 Ball. Overlaid onto this decade has been the price of health care. Because, really, your only option besides paying is dying.
This is capitalism at its absolute worst. This carnivorous heard of revenue harvesters is consuming its own flesh. A cursory examination of the first 40 years of the 20th century bears out an excellent example of what predatory capitalism will reap. Aside from stretching society at the seams it brought down government intervention on an epic scale. The longer the current incarnation of that period persists the greater the chorus will be for intervention, regardless of reasonableness. Bear in mind that I'm an avowed capitalist when I say I don't have a problem proposing that the government nationalize the oil industry. The waste and abuse of applying civil service and congressional oversight to the energy industry would be a welcome change from compulsory contributions to epic racketeering. (I defy anyone to ethically justify hundred million dollar bonuses.) The longer this persists the more people are going to pushed into the arms of those that offer radical solutions. (Including mine. Thankfully I'm just Jake Jackass with a blog instead of a policy maker.) This has the real possibility of contorting the entire system to even worse ends. I don't know what will fix it, but like everyone else I can see that its fundamentally broken.
Ares
I'm certainly no economist or expert on commodities valuation, but something has definitely changed in the last decade. There appears to be a heard of investment capital that has moved from commodity to commodity. The unifying thread in the movement is that the commodities are staples that consumers have little choice about consuming. It started with an intensive push for deregulation of portions of the power industry in the 90's. This resulted in criminal-level graft in California. (A sitting governor was deposed and the state was economically knee-capped at a cost a few indictments and hand slap fines.) This was followed closely by the absurd run-up in housing prices. Housing will have to retreat quite a bit further before it will be affordable to the average American again. Now we're a few years into a speculative frenzy concerning oil. The hedge fund alarmists have constructed a theater of imagination where any uttered disturbance is cause for increase in price. Favorite examples of the past few years have been rockets fired at oil tankers, forecasts of hurricanes in the Gulf of Mexico, a rebel attack on a refinery in Nigeria, and any statement by anyone in Iran. None of these actually result in a supply reduction, but the the downrange facts have no place among current shakes of the Magic 8 Ball. Overlaid onto this decade has been the price of health care. Because, really, your only option besides paying is dying.
This is capitalism at its absolute worst. This carnivorous heard of revenue harvesters is consuming its own flesh. A cursory examination of the first 40 years of the 20th century bears out an excellent example of what predatory capitalism will reap. Aside from stretching society at the seams it brought down government intervention on an epic scale. The longer the current incarnation of that period persists the greater the chorus will be for intervention, regardless of reasonableness. Bear in mind that I'm an avowed capitalist when I say I don't have a problem proposing that the government nationalize the oil industry. The waste and abuse of applying civil service and congressional oversight to the energy industry would be a welcome change from compulsory contributions to epic racketeering. (I defy anyone to ethically justify hundred million dollar bonuses.) The longer this persists the more people are going to pushed into the arms of those that offer radical solutions. (Including mine. Thankfully I'm just Jake Jackass with a blog instead of a policy maker.) This has the real possibility of contorting the entire system to even worse ends. I don't know what will fix it, but like everyone else I can see that its fundamentally broken.
Ares
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