Blowup in progress

—- via http://english.aljazeera.net

What Phil sees is a giant but intricate game of market manipulation and rigging by a cartel – not just an industry – that actually has loaded tankers criss-crossing the oceans but only landing when the price is right.

“”There is nothing that the conga-line of tankers between here and OPEC would like to do more than unload an extra 277 million barrels of crude at $112.79 per barrel (Friday’s close on open contracts and price) but, unfortunately, as I mentioned last week, Cushing, Oklahoma (Where oil is stored) is already packed to the gills with oil and can only handle 45M barrels if it started out empty so it is, very simply, physically impossible for those barrels to be delivered. This did not, however, stop 287M barrels worth of May contracts from trading on Friday and GAINING $2.49 on the day. He asks: “Who is buying 287,494 contracts (1,000 barrels per contract) for May delivery that can’t possibly be delivered for $2.49 more than they were priced the day before? These are the kind of questions that you would think regulators would be asking – if we had any.” “”

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Nope, that’s not how it works. Its actually pretty simple. If there are more contracts traded than physically delivered, for all those virtual barrels of oil, it’s a ZERO SUM game. For every contract bought, and money made, there’s a contract sold, and money LOST. This has nothing to do with where prices are, because not only is it profit-neutral, it’s also price neutral. For every buyer, there’s a seller.

What moves prices is supply and demand. And that demand isn’t artificial by authorship of some “cartel” (even though there are oil cartels and lobbying beyond any sanity in the world capital of insitutionalized corruption). That demand is caused by one single thing: The federal bank of the U.S. driving down interest rates on almost everything so that they create an artificial economic recovery by making people and companies take on loans that they don’t need. Bernanke even said in plain English he wants to drive stock prices up artificially so that people would feel that they are more wealthy and a recovery is there so they would start spending and actually create the recovery he made them believe in by his measures. (Which has been proven to not work on an economic level, but that’s another story.)

This also has the side effect that all the capital - which HAS to go somewhere - cannot stay where it used to stay, in short-term interest bearing bonds and the like. The interest on those has been driven to effectively be negative by Ben Bernankes actions. So the money can’t stay there usefully. It has to go SOMEWHERE though- so it goes into everything else there is. Also, all the paper issued by governments, for those same reasons, is seen by an ever growing amount of people as potentially worthless, because more and more of it is being printed.

So what do people do? They swap the paper money, of which there is a massive oversupply, and less credibility of it being worth something, into something for which there definitely will be long-term demand.

And that is oil and all the other tangible goods a.k.a. commodities. It’s nothing but the consequence of bailouts and artificially low interest rates.

Yes, it is speculation. Speculation by the government(s) - first and foremost by Ben Bernanke and his ivory tower academics, that if you make people *believe* that there is a recovery by driving stock prices up, that they can create a recovery out of thin air.