Bailing Out The Oil Market
While everyone knows the U.S. government is looking to bail Wall Street banks, few people realize that it’s also bailing out speculative oil and commodities traders in the process, fueling a sharp rise in energy prices.
Lehman Brothers held enormous trading positions in commodities markets. If those positions had been liquidated suddenly, the price of everything from wheat to oil would have collapsed. The Commodity Futures Trading Commission the main regulator of U.S.commodity markets, allowed Wall Street’s investment banks and trading companies to take control of massive positions in commodities markets called swaps held by Lehman Brothers and AIG.
The result: Oil prices spiked by a whopping $16 per barrel on Monday, the largest single-day rise in oil prices ever.
“If speculators were forced to liquidate their positions, oil would easily be $65 to $75 per barrel by the time the liquidation was complete,” said Michael Masters, the founder of Atlanta-based hedge fund Masters Capital Management. Tuesday, oil was trading at $108.74 in midday trading in New York.
So while Lehman Bros and AIG filed for bankruptcy (to evade creditors), and got a massive bail out from Uncle Sam, they were busy jigging the system so, well, so your gas cost more and they lost less. Meanwhile their chum in the game, Mr Paulson, former CEO of JPMorgan, where he picked up a measly 700 million in pay and departure bonus, and has a “blind trust” holding a little 500 million in JP stocks for him (real blind this one), offered up his dump-it-all-on-the-public opening gambit, so whatever rip-off is voted on and passed will smell like roses, however noxious it really is. So far none of the “compromises” have actually meant much, but the net and the MSM are full of fulminations about the yahoo mentality of those who pressed so hard outside that enough threatened congressmen voted no, if only for the moment. I guess the idea is that if this is done in pieces, when the full quadrillion bucks of funny derivatives leverage paper is covered, we won’t have noticed. Ha ha….