free markets are unstable and prone to manipulation:free market capitalism at its best:)The Global Oil Scam:50 Times Bigger than Madoff most of the trading is unregulated by the government we have only a slim idea of the illusion perpetrated
Nickname unavailable
capitalism at its best:)The Global Oil Scam: 50 Times Bigger than
Madoff, most of the trading is unregulated by the government, we have
only a slim idea of the illusion being perpetrated in the energy
sector
The Global Oil Scam: 50 Times Bigger than Madoff
November 11, 2009 | about:
Philip Davis
$2.5 Trillion - That’s the size of the global oil scam.
It’s a number so large that, to put it in perspective, we will now
begin measuring the damage done to the global economy in "Madoff
Units" ($50Bn rip-offs). $2.5Tn is 50 times the amount of money that
Bernie Madoff scammed from investors in his lifetime, but it is less
than the monthly excess price the global population is being
manipulated into paying for a barrel of oil.
Where is the outrage? Where are the investigations?
Goldman Sachs (GS), Morgan Stanley (MS), BP (BP), Total (TOT), Shell
(RDS.A), Deutsche Bank (DB) and Societe Generale (SCGLY.PK) founded
the Intercontinental Exchange (ICE) in 2000. ICE is an online
commodities and futures marketplace. It is outside the US and operates
free from the constraints of US laws. The exchange was set up to
facilitate "dark pool" trading in the commodities markets. Billions of
dollars are being placed on oil futures contracts at the ICE and the
beauty of this scam is that they NEVER take delivery, per se. They
just ratchet up the price with leveraged speculation using your TARP
money. This year alone they ratcheted up the global cost of oil from
$40 to $80 per barrel.
A Congressional investigation into energy trading in 2003 discovered
that ICE was being used to facilitate "round-trip" trades. Round-trip
trades occur when one firm sells energy to another, and then the
second firm simultaneously sells the same amount of energy back to the
first company at exactly the same price. No commodity ever changes
hands. But when done on an exchange, these transactions send a price
signal to the market and they artificially boost revenue for the
company. This is nothing more than a massive fraud, pure and simple.
"Traders of the the ICE core membership (GS, MS, BP, DB, RDS.A, GLE &
TOT) wouldn’t really have to put much money at risk by their standards
in order to move or support the global market price via the BFOE
market. Indeed the evolution of the Brent market has been a response
to declining production and the fact that traders could not resist
manipulating the market by buying up contracts and “squeezing” those
who had sold oil they did not have. The fewer cargoes produced, the
easier the underlying market is to manipulate." - Chris Cook, Former
Director of the International Petroleum Exchange, which was bought by
ICE.
How widespread are round-trip trades? The Congressional Research
Service looked at trading patterns in the energy sector and this is
what they reported:
This pattern of trading suggests a market environment in which a
significant volume of fictitious trading could have taken place. Yet
since most of the trading is unregulated by the government, we have
only a slim idea of the illusion being perpetrated in the energy
sector.
DMS Energy, when investigated by Congress, admitted that 80 percent of
its trades in 2001 were round-trip trades. That means 80 percent of
all of their trades that year were bogus trades where no commodity
changed hands, and yet the balance sheets reflect added revenue.
Remember, these trades are sham deals where nothing was exchanged.
Duke Energy (DUK) disclosed that $1.1 billion worth of trades were
round-trip since 1999. Roughly two-thirds of these were done on the
InterContinental Exchange; that is, the online, nonregulated,
nonaudited, nonoversight for manipulation and fraud entity run by
banks in this country. That means thousands of subscribers would see
false pricing. Under investigation, a lawyer for JPMorgan Chase (JPM)
admitted the bank engineered a series of “round-trip” trades with
Enron.
You can chart the damage done by Goldman Sachs and their gang of
thieves by looking at commodity pricing pre- and post-ICE. Before ICE,
commodities followed a more or less normal growth path that matched
global GDP and was always limited in price appreciation by the fact
that, ultimately, someone had to take delivery of a physical commodity
at a set price.
ICE threw that concept out the window and turned commodity trading
into a speculative casino game where pricing was notional and
contracts could be sold by people who never produced a thing, to
people who didn’t need the things that were not produced. And in just
5 years after commencing operations, Goldman Sachs and their partners
managed to TRIPLE the price of commodities.
Goldman Sachs Commodity Index funds accounted for $60Bn out of $100Bn
of all formula-managed funds in 2007 and investors in the GSCI lost
15% in 2006 while Goldman had a record year. John Dizard, of the
Financial Times, calls this process "date rape" by Goldman Sachs as
the funds index rolls cost investors 150 basis points of return
annually ($9Bn on the Goldman funds) but GS, under the prospectus, is
able to "manage our corresponding position," which means that it has
to deliver a price at the end of the roll period. If Goldman can cover
that obligation at a better price, they will, and GS pockets the
difference. This is why we see such wild moves in the days before
rollover, since there are billions riding on GS hitting their target
every month.
It is not surprising that a commodity scam would be the cornerstone of
Goldman Sachs’s strategy. CEO Lloyd Blankfein rose to the top through
Goldman’s commodity trading arm J Aron, starting his career at J Aron
before Goldman Sachs bought them over 25 years ago. With his colleague
Gary Cohn, Blankfein oversaw the key energy trading portfolio.
According to Chris Cook: "It appears clear that BP and Goldman Sachs
have been working collaboratively – at least at a strategic level -
for maybe 15 years now. Their trading strategy has evolved over time
as the global market has developed and become ever more financialised.
Moreover, they have been well placed to steer the development of the
key global energy market trading platform, and the legal and
regulatory framework within which it operates." Cook adds:
It appears to me that what has been occurring in the oil market may
have been that – through the intermediation of the likes of J Aron in
the Brent complex – long term funds have been lending money to
producers – effectively interest-free - and in return the producers
have been lending oil to the funds. This works well for as long as
funds flow into the market, or do not withdraw in quantity, but once
funds withdraw money from the market, there is a sudden collapse in
price.
A combination of market hype, the opacity of the Brent Complex and the
relatively small scale of trading of the benchmark BFOE crude oil
contract enabled the long run up in prices, and several observers
believe that the dramatic spike to $147.00 per barrel was the specific
outcome of the collapse of SemGroup, which that company’s management
subsequently blamed mainly on Goldman Sachs.
Mike Riess issued a study called "Modern Market Manipulation" in which
he describes how GS, MS, DB et al have systematically created an
environment that rewards those who manipulate the system, robbing the
poor to send the money up they company ladder in exchange for record
bonus payouts, which (by design) are the majority of their traders’
salaries:
Before the ‘80’s, there were just us traders. "Rogue" traders arrived
on the scene with the large institutional participants, both private
and public. Today’s companies and government marketing boards are
large enough for senior management to distance itself from
controversy, including market manipulation.
In a competitive, amoral environment, middle managers in these mega-
organizations have the authority to hijack an institution’s reputation
and the financial clout to manipulate the market—and they do. As long
as they succeed, they enjoy promotions and perks and, sometimes, the
fruits of embezzlement. If the manipulation unravels, the company
denies any knowledge and hangs the rogue out to dry. We’ve seen this
over and over again, most recently with D’Avila and Codelco, Hamanaka
and Sumitomo, Leeson and Barings and Tsuda and Daiwa Bank.
The CFTC’s definition of manipulation is:
• A planned operation that causes or maintains an artificial price
• Unusually large purchases or sales in a short period of time in
order to distort prices
• Putting out false information in order to distort prices.
In mid-2008 it was estimated that some $260 billion was invested in
the Brent energy markets on the ICE, while the value of the oil
actually coming out of the North Sea each month, at maybe $4 to $5
billion at most. NYMEX trading follows a similar path with 258,000,
1,000-barrel contracts open for December delivery (258M barrels),
which were traded 327,000 times yesterday alone yet, at the end of the
period, less than 40M barrels of oil will actually be delivered as
that is the total capacity at Cushing, Okla. - where NYMEX contract
deliveries are settled. Every single one of those traders know it is
not even possible for 80% of the contracts they are trading to be
fulfilled - it's a joke, but the joke is on you.
Over the course of an average month at the NYMEX, 5 billion barrels of
oil will be traded, with a fee collected on every single transaction.
That is ultimately passed down to US consumers, yet less than 40M
barrels will actually be delivered. That is just 8 tenths of 1 percent
of actual demand for the product that is being traded - ie. 99.2% of
the oil transaction fees being paid by the American people do nothing
more than create fees for the traders and record profits and bonuses
for the trading firms.
Index speculators have now stockpiled, via the futures market, the
equivalent of 1.1 billion barrels of petroleum, effectively adding
eight times as much oil to their own stockpile as the United States
has added to the Strategic Petroleum Reserve over the last five years.
Today, in many commodities futures markets, they are the single
largest force. The huge growth in their demand has gone virtually
undetected by classically trained economists who almost never analyze
demand in futures markets. As money pours into the markets, two things
happen concurrently: The markets expand and prices rise. One
particularly troubling aspect of index speculator demand is that it
actually increases the more prices increase. This explains the
accelerating rate at which commodity futures prices (and actual
commodity prices) are increasing.
Before ICE, the average American family spent 7% of their income on
food and fuel. Last year, that number topped 20%. That’s 13% of the
incomes of every man, woman and child in the United States of America,
over $1Tn EVERY SINGLE YEAR, stolen through market manipulation. On a
global scale, that number is over $4Tn per year - 80 Madoffs! Why is
there no outrage, why are there no investigations? Well, the answer is
the same - $4Tn per year buys you a lot of political clout. It pays to
have politicians all over the world look the other way while GS and
their merry men rob from the poor and give to the rich on such a vast
scale that it’s hard to grasp the damage they have done and continue
to do to the global economy.
CIBC Chief Economist Jeff Rubin issued a report last year that blames
the current recession on high oil prices, saying defaulting mortgages
are only a symptom. According to Rubin, these higher oil prices caused
Japan and the Eurozone to enter into a recession even before the most
recent financial problems hit. Higher oil prices started four of the
last five world recessions; we shouldn’t be too surprised if they
started this one also:
Oil shocks create global recessions by transferring billions of
dollars of income from economies where consumers spend every cent they
have, and then some, to economies that sport the highest savings rates
in the world. While those petro-dollars may get recycled back to Wall
Street by sovereign wealth fund investments, they don’t all get
recycled back into world demand. The leakage, as income is transferred
to countries with savings rates as high as 50%, is what makes this
income transfer far from demand neutral.
There is no shortage of oil. OPEC alone has 6-7 million barrels a day
of spare capacity, more than the total disruption of any single
country and any two countries other than Saudi Arabia could offset.
Additionaly, ICE partners Total and JPM are part of the cartel that is
totally skewing the global demand picture by storing 125M barrels of
oil in offshore tankers. That’s 15 days of US imports that have been
"ordered" but never delivered, so they show up as an extra 1Mbd of
global demand, though nobody actually wants them. Land-based storage
is also bursting at the seams, with global supplies up to 61 days of
total consumption (84Mbd) up from 52 days last year.
That’s 5 billion barrels of oil already out of the ground, in barrels
and ready to go AND THEY KEEP MAKING 86M MORE EVERY DAY! Where is the
shortage? Mainly, it is media hype pushed by "analysts" at the very
firms that profit the most from high oil prices. Goldman Sachs issues
bullish opinions on oil and builds large positions in oil, while it is
the cartel’s job to hide oil in offshore tankers, and then sell
forward all the oil, with futures contracts, locking in the high
price. Of course they have their media hounds as well, most notably
the Drudge Report. As noted by Goldmansachsrules:
Type in the word "OIL" inside the "Drudge Report" search engine. It
returns 1,965 headlines with the word "OIL." Over the last couple
years, The Drudge Report has ran 1,965 headlines with the word "OIL."
Most of these articles were hosted by the worthless organizations of
Yahoo, Breibart, APNews, and Reuters. The Drudge Report just creates
the headline, and links it the article hosted by who ever is doing the
"hyping."
Search on the word "credit crisis" and you only get 12 archived
headlines. The word "bailout" yields only 268. The word "bank" returns
only 568. So you have the Drudge Report hyping the oil market, because
they bring it up almost 2,000 times. Unlike the "credit crisis" or
"Wall Street Bailout" that actual did happen, the oil market and what
did/didn’t happen between Israel/Iran is plugged 10 times more!
Of all the 1,965 articles that the Drudge Report ran with the word
"OIL" in the title, most were hyping the oil market. The most
notorious cases, a few times a week, were hosted by Yahoo, Breibart,
and AP News. Most of these articles were plugged with the same
paragraph that stated if "Israel were to attack Iran, Iran would
retaliate by taking over the straits of Hormuz, the largest pathway
for oil and we all know what that would do to the price of oil.
It truly takes a global village of manipulators and their lackeys to
pull off a con on the scale of oil, but it’s also the most profitable
scam ever perpetrated on the people of this planet, as they take
control of a vital resource and then create artificial shortages and
drive speculative demand in order to charge you an extra dollar per
gallon of gas. You don’t complain because it’s "only" $15-$20 every
time you fill up your tank, but that’s what they count on and that’s
where you’re wrong - it’s $20 from you and $20 from every single one
of your customers once or twice a week, and $20 more your employees
need just to get to work. It’s money that could be going into your
business instead of a new gold bathtub for a Saudi Prince or a Goldman
trader.
Global drivers consume 1.7Bn gallons of gas every single day. That $1
is $50Bn a month, a Madoff per month that is being taken away from you
and your business and the non-energy/financial businesses you invest
in. Of course we can give up and invest in those sectors (we do) but
that doesn’t do much for the global economy and, even as you sit here
now, not doing anything, those oil profits have been plowed into the
copper and gold markets and now the same Goldman energy cartel is
bidding to take over your clean air (through Carbon Credit trading)
and your clean water.
Maybe when they are charging you $80 a gallon for water and ten cents
a breath you’ll want to do something about it. I think I’ll start
right now and you can too! Here are the Email addresses and fax
numbers for all of your Senators, Congresspeople and Governors. Send
this article to them and let them know you’d like to see an
investigation. Take a few minutes of your time to save a few bucks on
your next gallon of water!
Editor's note: ICE has a web site www.globalmarketfacts.com that seeks
to set the record straight on the exchange and the changes it has made
to attempt to rein in problematic trading practices.
Demon Buddha
> free markets are unstable,
And which free markets would those be? Please name them.
> and prone to manipulation:free market
> capitalism at its best:)The Global Oil Scam: 50 Times Bigger than
> Madoff, most of the trading is unregulated by the government, we have
> only a slim idea of the illusion being perpetrated in the energy
> sector
What do any of the items in your short litany have to do with free markets?
Nickname unavailable
where is the oil market regulated? if you do not understand that
there really is no such thing as a free market, then you will
understand.
Demon Buddha
> On Nov 24, 8:12 pm, Demon Buddha <Nob...@no.where> wrote:
>> Nickname unavailable wrote:
First you state that:
>>> free markets are unstable,
Then you assert that:
> there really is no such thing as a free market
Well, which is it? If there is no such thing as a free market, how can
one be unstable? Was this a typo or are you just having a little fun
contradicting yourself? :)
Nickname unavailable
> Nickname unavailable wrote:
> > On Nov 24, 8:12 pm, Demon Buddha <Nob...@no.where> wrote:
> >> Nickname unavailable wrote:
>
> First you state that:
>
> >>> free markets are unstable,
>
> Then you assert that:
>
> > there really is no such thing as a free market
>
> Well, which is it? If there is no such thing as a free market, how can
> one be unstable? Was this a typo or are you just having a little fun
> contradicting yourself? :)
you are clueless.
Demon Buddha
> On Nov 25, 7:53 pm, Demon Buddha <Nob...@no.where> wrote:
>> Nickname unavailable wrote:
>>> On Nov 24, 8:12 pm, Demon Buddha <Nob...@no.where> wrote:
>>>> Nickname unavailable wrote:
>> First you state that:
>>
>>>>> free markets are unstable,
>> Then you assert that:
>>
>>> there really is no such thing as a free market
>> Well, which is it? If there is no such thing as a free market, how can
>> one be unstable? Was this a typo or are you just having a little fun
>> contradicting yourself? :)
>
> you are clueless.
Perhaps, but you still haven't answered the question.
Nickname unavailable
because, you are clueless.
Demon Buddha
Sure. More likely, you have none.
Nickname unavailable
except, you are clueless. you do not even know what demand is, let
alone what free market economics represents.