The futures market would be policed for the next 70 years — until that night in 2000, when Gramm handed the keys to Enron, Goldman, and the Kochs. The amendment passed without hearings or public notice. Democrats, practicing their patented brand of acquiescence, were happy to ride shotgun. President Bill Clinton signed it into law.

They were "bipartisan, effete snobs who thought they knew better than everybody," says Mark Cooper. He's the director of research for the Consumer Federation of America, among the many who warned Washington that it was playing with matches near dynamite. He'd soon be proven spectacularly correct.

Gramm's amendment became known as the "Enron Loophole," named for the criminal empire that was then America's seventh largest company. Though Enron would soon crumble in a heap of avarice and fraud, Gramm and Co. had unleashed the parasites, allowing them to prey on American commerce.

Former international securities lawyer Dennis Kelleher: “Wall Street is a high-crime area in which we basically have no cops on the beat.”
Charles Steck
Former international securities lawyer Dennis Kelleher: “Wall Street is a high-crime area in which we basically have no cops on the beat.”
William Black, former bank regulator turned economist at the University of Missouri-Kansas City: ““Nine of the largest financial institutions in the world pulled the pin on their own grenades.”
Michael Forester
William Black, former bank regulator turned economist at the University of Missouri-Kansas City: ““Nine of the largest financial institutions in the world pulled the pin on their own grenades.”

Prior to the change, speculators were generally kept to no more than 30 percent of any given market. Anything beyond that became dangerous. That's because they have no concern for the things they're buying or the people who use them. They're simply betting on price swings. The more volatile the market, the more money they make. Most sell well before they'll ever take delivery of, say, a load of sugar.

Yet Congress had set them free. Banks like JP Morgan and Lehman began to rally large, institutional investors to bet on oil. It took them just five years to pervert the market's very purpose. By 2005, they'd set off a buying frenzy that launched prices into the stratosphere.

Sherri Stone, vice president of the Petroleum Marketers Association of America (PMAA), likens it to buying a home. Under normal conditions of supply and demand, you might have a few other people bidding for the same house. "But with speculation, now you have 200 other people bidding for that house. You're going to pay an enormous price for this house."

By the time the economy began to collapse in the summer of 2008, speculators had cornered a stunning 81 percent of the oil market. Some had even begun to hoard fuel, just as the robber barons had done a century before. Olav Refvik, a top trader at Morgan Stanley, became known as the "King of New York Harbor" because he was leasing so much storage space.

Yet the bankers' incompetence would once again prove dangerous to themselves and everyone else. They'd already sabotaged the housing market. Artificially high fuel prices were the second prong of their attack.

The U.S. economy was officially in free-fall.


MEET AMERICA'S DUMBEST BOOKIES
Think of Wall Street banks as not much different than your neighborhood bookie. After all, there's little difference in betting on Starbucks stock or a Dodgers game. The smart ones realize they can make a handsome living just sitting back, wisely setting odds, and making a killing off the transaction fees.

But what separates the two is that bankers violate a cardinal rule of the bookmaking trade: They're degenerate gamblers themselves. And history says they're very much in need of adult supervision.

In just the last 25 years, the financial industry has gone from the savings and loan crisis to the tech stock bubble to the accounting fraud scandals to the mortgage industry collapse. Pepper in a ceaseless string of criminality — from Drexel Burnham Lambert to MF Global — and you realize the industry has routinely set off large bombs in the U.S. economy for a quarter century.

Worse: The pattern is accelerating.

This reign of depravity just happens to correspond with deregulation, the legacy of Ronald Reagan. Surely he was right to reduce the red tape and paperwork garroting small business, the nation's largest and most stable employer. But his disciples took it as a one-size-fits-all theory. The people benefiting most were those who could afford to buy senators like Phil Gramm.

Deregulation of the futures markets would solely serve America's greatest welfare queens, Big Oil and Big Finance. Over the years both had purchased competitive advantages from Congress, making a mockery of the free market. America's five largest oil companies receive $20 billion in welfare annually, largely through tax breaks afforded to no other industry. Big Financiers pay half the personal tax rates of their brethren at community banks. Despite buying off the umpires, they still couldn't stand on their own two feet.

"Nine of the largest financial institutions in the world failed" in 2008, says William Black, a former bank regulator turned economist at the University of Missouri-Kansas City. "That should petrify people. All of them pulled the pin on their own grenades."

When the economy collapsed, speculators found themselves with a small problem. No one could afford to buy gas. In just a few short months, the price plunged from $147 to $30 a barrel.

Some good came from this. President Barack Obama would soon follow Sarah Palin's charge, increasing drilling in the U.S. He also strong-armed Detroit into producing more fuel-efficient cars as part of their bailout.

Finally, the simple fact that we're still broke four years later has caused U.S. consumption to steadily decline. Today, America exports more oil than it imports for the first time since the 1940s.

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5 comments
Jeffrey J. Brown
Jeffrey J. Brown

Here is my short version of what I think is going on in global oil markets. Annual Brent prices doubled from $25 in 2002 to $55 in 2005. So, we had a strong price signal. And we saw a strong positive supply response, with global supplies of oil increasing across the board. Annual Brent prices doubled again, from $55 in 2005 to $111 in 2011 (with one year over year decline in 2009). In response, crude oil production was flat. We saw small increases in total petroleum liquids and total liquids (inclusive of low net energy biofuels), and we saw a material decline in Global Net Exports of oil (GNE) and in Available Net Exports (GNE less China & India's net imports), with the volume of oil that is available to importers other than China and India falling from 40 mbpd (million barrels per day) in 2005 to 35 mbpd in 2011. And on the demand side: Here is a chart showing normalized oil consumption from 2002 to 2010 (BP data) for China, India, top 33 net oil exporters and for the US: http://i1095.photobucket.com/albums/i475/westexas/Slide1-16.jpg The chart is not yet updated for 2011, but the trend on the chart continued in 2011, to-wit, China, India and the oil exporting countries showed increasing oil consumption as Brent prices doubled from $55 in 2005 to $111 in 2011, while consumption in the US (and in most other oil importing OECD countries) fell. Therefore, while slowly increasing US oil production will help, the dominant trend we are seeing is that the US, and most other developed oil importing OECD countries, are--so far at least --gradually being priced out of the global market for exported oil, as annual global (Brent) crude oil prices doubled from 2005 to 2011. For more info, you can do a search for: Peak Oil Versus Peak Exports.

Jeffrey J. Brown
Jeffrey J. Brown

Regarding speculators, here is something that has always puzzled me about the "Blame the speculators" theory. Let's stipulate, for the sake of argument, that the rascally speculators drove the annual average price of Brent crude from $55 in 2005 to $111 in 2011 (with a decline in 2009). Preceding this doubling in annual crude oil prices, there was another doubling, from $25 in 2002 to $55 in 2005. In response to the 2002 to 2005 doubling, the EIA shows that global crude oil production (Crude + Condensate) increased rapidly, from 67 mbpd (million barrels per day) in 2002 to 74 mbpd in 2005. At this rate of increase, we would have been at about 90 mbpd in 2011. However, the EIA shows that post-2005 annual global crude oil production has not exceeded 74 mbpd for six straight years, ranging between 72 and 74 mbpd. Here's my question: Even if the rascally speculators drove the price of oil up from 2005 to 2011, why did we see no global crude oil supply response?

Oscarcmpn
Oscarcmpn

Sure took a lot of words to say, Clinton signed Gramm Leach into law. Investors have used the law to their advantage. Results mixed, as usual. The rest is a lot of gasping and harrumphing. I agree with most of what you say, but think you did a lousy job of explaining how it works. You need to say more than "Koch brothers are bad" and "hedgefunds are evil." IMO

Smoking spirit
Smoking spirit

smokingspirit | 15 August, 2011 16:26 The Muslimization of America Ron Paul wins second place finish in Iowa straw poll loosing by less the 200 votes, but the press interviews the other candidates. Ron’s message just doesn’t get out there. We are left with the other candidates one who claims “we should fast (stare) and pray more” during Ramadan And the other who says the only difference between the “right wing and the talibomb is one is a cult,” but then America just needs more right wingers so when the Muslim plays the moral card the Christian is always suppose to lose. We have seen in the past that the American has to blow up mail boxes to get his message out but we never hear his message- We condemn the Arabs for shutting down the internet and yet when a cop kills a modern day Thomas Edison, Thomas Jefferson or Henry Ford (all illegal drug users) they shut down the internet to prevent peaceful protest in California- Time Magazine points out “the true science of weed is being subverted.” Least we forget that the Mormons are Anti-Smoking, Anti Drinking and it was in Texas they demanded that the people take the medical monopolies breathalyzer test not because the owner of the bar wanted the person out or that the person was driving but because he might be celebrating the blood of Christ the water of life or that Holy Spirit that does not fit into a computer, but take the test or be arrested! They put a temporary stop to this but no protections were added to stop them from next time, This will give them time to identify those who won’t join them, as they stack the population with more Muslims, We couldn’t have more Thai – Japan- Chinese or Pilipino girls, but we get more Muslim refugees and the population of freedom loving Americans continues to decline, Help keep the world free stop the medical monopoly(their foreign owned pharmaceutical companies and their secret Arab funding) it’s not too late to change our fate and stop these snakes before they turn this world into another anti drinking- anti smoking state. From their nicotine patch to their Parkinson’s drug they don’t just make designer steroids for the jocks and with two shooting a night in almost every city they are just not helping these people out. Americans use to have the largest saving in the world but they work to run the decedent American broke, or just join the 700 club and you too can prosper, the middle class has been under attack for too long, Disaster economics ( Harper Magazine) is no longer just for the individual as we saw in New Orleans. We could have fuel at $ 0.98 per gallon if weed was legal- yet we have to pay the Arabs $4.00 per gallon as They work to eliminating the decedent American, will you join them in order to prosper or will you make a stand for freedom and liberty read more in the book About - Christians and freedom @amazon.com or An opening for the living @ Amazon.com or Visit our web site @ www.SMOKINGSPIRIT123.com

 
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