Saturday, July 4, 2009

Surprise, surprise

‘Rogue broker’ blamed for oil spike (h/t Naked Capitalism):

The startling spike in oil prices to their highest level this year on Tuesday was caused by a rogue broker who placed a massive bet in the Brent oil market, triggering almost $10m (€7m) of losses for his company.

PVM Oil Associates, the world’s largest over-the-counter oil brokerage, said on Thursday it had been the “victim of unauthorised trading”. The privately owned company said that as a result of the unauthorised trades it had been forced to close substantial volumes of futures contracts at a loss.


Oil traders in London and New York said the “unauthorised trading” explained the exceptional spike in business activity and prices in the early hours of Tuesday that some initially thought must have been caused by a geopolitical event. “Trading volumes rose overnight and prices jumped more than $2 a barrel without apparent justification,” a senior oil trader in New York said.

Prices rose in one hour from $71 to $73.5, the highest level for the year, according to Reuters data. In total, futures contracts for more than 16m barrels of oil changed hands in that hour – equivalent to double the daily production of Saudi Arabia, the world’s largest oil producer, and far more than the traditional 500,000 barrels for that time of the day.

Traders said the broker implicated had allegedly accounted for at least half of the unusual activity, with the rest the result of others chasing the rally. Oil prices on Thursday fell to $66.5 a barrel, down almost 10 per cent from Tuesday’s peak.


This is the second episode of rogue trading in the oil market this year. In May, an oil trader at Morgan Stanley was banned by the City watchdog after he hid from his bosses potential losses on trades made under the influence of alcohol.

The incidents come as regulators are considering tougher oversight of the commodities markets after policymakers complained that speculators fuelled last year’s surge in oil and agriculture prices.

Between idiots like that broker and the folks at Goldman Sachs who have a fetish for speculation bubbles in commodities, someone gets screwed. Usually those of us who aren't movers and shakers in the wonderful world of investment banking are the ones who get it the worst. By the way, check out this paragraph from near the end of the article:

The involvement of PVM is ironic considering the company’s head, David Hufton, has been an outspoken critic of speculators in the oil market, calling some of the exchanges “electronic oil casinos”. In 2006, he said that “if futures exchanges did not exist, oil prices would be a lot lower”.

Add me to the list of outspoken critics of speculators in the oil market, if for no other reason than I can speak from personal experience as to what last year's oil bubble meant: skipped meals, juggling bills, way too much stress. Word to the wise: don't have relatives get terminally ill and require you or members of your immediate family to board the next available airplane to see them one last time, or have aging relatives freak out in the aftermath of said relative's death and insist that you drive halfway across the fricken continent to visit because they might die any second. I may seem pretty insensitive in my remarks one year hence, but then I've experienced a lifetime's worth of stress dealing with the aftermath of appeasing too many folks last year when air fares were ridiculous and gasoline and diesel prices were at historic highs (as it turned out, largely thanks to some high-priced speculators who could play God with the commodities markets from their cushy executive offices). This year, I've taken on extra work just to dig out from under enough to squeak by until next year's tax refund checks arrive. Just don't expect to read of exploits in consumerism at that point - it all gets put into savings, and now that I'm used to one to two meals a day after more or less having no choice for the last year, there's really no reason to change that particular habit (especially if it means the kids get to keep eating three squares a day). I'm guessing I'm not exactly alone among those who found themselves dealing with all manner of unwanted and unexpected expenses during last year's peak in fuel prices. I may be luckier in that I have a fairly secure job. I do share the misfortune of fellow rural denizens of being just isolated enough to where there is little choice of driving at least 10 miles to the next town with any real facilities (grocers, hospital, mechanics, veterinarians), so there's only so much that can be cut out of the driving budget (though we did successfully cut out what was possible, and again found no need to change those habits after the fuel price bubble burst last fall).

Friday, July 3, 2009

Looking more and more like an L-shaped recession

We might be heading into Japanese-style deflation territory according to Krugman (who has also invoked memories of the 1930s, arguably rightly so). Japan's economic meltdown occurred in the early 1990s, and has never truly recovered. Globally, as has been noted previously, the pattern has been largely deflationary. This particular "recession" (or whatever you want to call it) is going to be with us for a while.

Sidebar: since Thursday was the end of the work week (at least for those in government, and in the finance "industries") due to the July 4th weekend, it replaced Friday this week as the designated "bank closure day." We're now up to 52 bank failures for the year so far, with roughly half of a calendar year remaining. Interesting times, folks. Interesting times.

Thursday, July 2, 2009

For future reference

The Blogosphere 2.0. Laura McKenna has some interesting observations. Perhaps I'll have some follow-up remarks later.

SPLC's latest report on right-wing terrorist acts and attempts

Since it fits with one of my periodic themes, it is worth mentioning in passing. Basically, the SPLC has cataloged 75 attacks, plots, and attempts since the Murrah Federal Building bombing in Oklahoma City. I am of the opinion that it is our own home-grown terrorists and terrorist wannabes with whom we should concern ourselves rather than get bent out of shape over potential terrorist plots and attacks based from distant locations. The latter may be easier to focus fear and rage upon to the extent that there is a sense of "otherness" (brown skin, Islamic religion, etc.), and the former a bit harder to pay attention to given the similarities to avowed right-wingers and movement conservatives. The former are the more tangible threat. I'm also of the opinion that it is critical that when dealing with potential terrorists that we, as one of my British friends would have said a few years ago, should keep our wits about us (in other words, be sensible, rather than blow things out of proportion as was the case in the US after the 9-11 attack, and to a certain extent after the OKC attack).


Withdrawal in name only (h/t)

Wednesday, July 1, 2009

I know where I'd want to be if I were sick

There is a nation that has its act together when it comes to medical care. Hint: it ain't the US. Just to provide some contrast, there are a couple regulars who will recall that I ended up making an ER visit while I was an academic conference a few months ago. Although I don't visit ERs on a regular basis, it's safe to say that when your spouse is a person with a disability (as is my case), you end up seeing the inside of an ER occasionally. That aside, as US emergency room visits go, it was exemplary. Sadly, that really isn't saying much. It took about five or six hours from my arrival to get examined. We'll note that some tests were run, and it took several hours to have any idea of the results. I saw a doctor for all of about a half a minute. The nurses were great, but overworked. Eventually, I learned that my worst fears were not realized, and once a course of treatment was recommended, I was partially on the road to recovery. It would take an hour after discharge to get a prescription filled (in the US, one must go to a completely separate facility, often far removed from the ER, unless one has the good fortune to be sick during the limited hours in which your hospital's pharmacy might be open for business). The reason I ended up in the ER out of town was because I couldn't afford to see my regular doctor at home prior to leaving for the trip (for those wondering about the paradox in that statement - the trip was already largely paid for by the time I left town). I consider myself lucky in the sense that I have insurance through my employer. With that insurance, I "only" ended up owing about $700 for a saline drip, blood and urine tests, and that half minute with a doctor. I shudder to think of what the bill would be if I had no insurance. I can also tell you that US hospitals approach billing much the same way that loan sharks shake down their clientele. Since I live paycheck-to-paycheck, I'm one major emergency away from a very short life of grinding poverty. As I say, based on my personal life history, this was a "good" experience. Personally I would have felt safer had I ended up sick at an academic conference in Venezuela.

Here's the thing. As I've mentioned before, Americans spend more for health care than citizens of any other nation and yet somehow we manage to get far less for our money. To put it bluntly, the US health "care" system is sick. Don't get me wrong. Surely someone benefits from the status quo, but it isn't the average health care patient. Rather it is the parasites on the system, the insurance corporations, the pharmaceutical corporations, and the conglomerates that increasingly operate what pass for hospitals that benefit (even more specifically, it is the executives who draw the high-priced salaries who benefit). They're killing their host. All one need do is compare indices of quality of life with those of other nations, and the handwriting is on the wall: life expectancies for Americans are now lagging other industrialized nations and are on par with those typical of some third world nations; infant mortality rates, obesity rates, and so on are also worse than those found in the industrialized world.

It doesn't have to be so bad. There is no good reason for us to be saddled with a system that few of us can afford and that leads to preventable deaths of those who are low-income.

Rashied Ali turns 74 today

Ali is one of the more well known names in avant-garde jazz circles - perhaps best known for his role as John Coltrane's drummer from late 1965 until Trane's death in 1967. He's a bit under-recorded (just my opinion, and my typical complaint about most jazz performers), but his recorded work is exemplary. Rashied's solo recordings (mostly from the 1970s) are well-worth seeking out, as well as recording sessions led by the aforementioned John Coltrane, Alice Coltrane, Alan Shorter, Charles Gayle, Marion Brown, Archie Shepp, and Jackie McLean. More recently, Ali has led a project called Prima Materia which focuses on covering and reinterpreting the music of Albert Ayler and John Coltrane.

Sidebar: His brother Muhammad is also a drummer, most noteworthy for his work with Frank Wright during the 1970s.

Tuesday, June 30, 2009

Leave it to the Oklahoma legislature

or a subset thereof to completely embarrass itself. I can assure anyone living in OK that the current economic crisis has absolutely nothing to do with some arcane culture war that some of its legislators seem bound to keep fighting for reasons that escape most normal people. Hell, the reasons the nation is in its current dire straits can be summed up quite simply: we've been stuck in a bubble economy for several decades, have lived as a society way beyond the means of our natural resources, and have lived with policies that have ultimately required the government to borrow against the future in order to maintain all the trappings of empire (including 700+ military bases around the world, a palatial embassy in the latest quasi-colony, etc.). Every other world power has followed a similar trajectory, leading ultimately to mounting economic crises and an eventual fall (some have had relatively soft landings, like the UK after WWII, whereas others have ended in disaster, such as Rome). Blaming Obama for something that has been decades in the making is irrational, and especially linking the current economic straits to something as inane as not following some set of religious incantations that apparently all Presidents must now follow according to the denizens of Wingnuttia. In reality, it wouldn't matter if a President continued to recognize a "national day of prayer" to God, Allah, or the Flying Spaghetti Monster, or engaged in some other ritual involving magical thinking, or simply refused to engage in any such ritualistic behavior. The fundamentals of the current "great recession" would remain unchanged. The flipside to all this, of course is that lavishing Obama with praise for all his hopiness and changiness won't change the fundamentals of the "great recession" either. Resorting to tribal behavior will not help repair the economy, or soften the landing. And yes, there is going to be a landing.

One thing we can all do that would be semi-constructive is to stop looking for saviors. There are none to be found. Similarly, stop looking for scapegoats. The temporary buzz that some get from blaming others for problems that are not of their making will wear off like so much meth (something Sally Kern's constituents know of quite well, I'm sure), all the while the problems continue to fester. Instead, here's a mashup of suggestions that might be soften the landing as we continue our decline, starting with:
Every once in a while I run into a decent laundry list of things for our society to do as we enter the post-oil era. Jim Kunstler, for example, in his latest post "Disarray" offers a number of things that we could do that would be far more constructive than to live in denial or avoid the inevitable altogether. Although I won't agree with all his suggestions, most are worthy of consideration - in particular it makes sense to stop building highways and freeways, as they'll probably be useless within about a generation (depending on one's level of optimism, maybe considerably sooner or later than that). Kunstler has commented from time to time that the US rail system is worse than Bulgaria's, which is quite a feat given that Bulgaria is a relatively impoverished former Soviet-bloc nation. So it goes. What he suggests is actually overhauling the railways, as that's going to be the future for most of us when it comes to travel - whether via cross-country or within an urban area. My impression is that the Europeans are generally way ahead of us there, and hence will probably feel the withdrawal pains from oil addiction a bit less than us. There's a great deal of psychological preparedness too - if I had a slogan, it would be one I ran into as a teen in the early 1980s, "small is beautiful." Whether it's gargantuan security states, corporate farms, big box stores, large-scale office parks, etc., we need to live with the realization that such creations are not sustainable. It'll also be crucial to keep in mind that there will be a lot of really pissed off individuals who, having lost everything including the very suburban "civilization" that was the center of all things American (as Kunstler mentions early on, suburbia is essentially our way of life that is now in the beginning stages of collapsing), will be looking for scapegoats and false prophets offering a return to the "glory days."

I'd probably add a few things of my own - most crucially as orderly and as soon as possible vacate the overseas military bases and get our troops home. Like Dmitry Orlov, I am concerned about the prospect of large numbers of these folks getting stranded in the event that the current US system collapses more rapidly than any of us could imagine. Turning off the war machine would also serve to preserve what petroleum is still left (the War on Terra has led to a considerable increase in oil consumption over the course of this decade). I'd probably also suggest that the sort of hyper-individualism that our culture promotes is not sustainable, and that the time has come to redevelop ties to family and community, as we're going to need each other much more as we are increasingly forced to face the collapse of one way of life and the beginnings of whatever is to replace it.
Followed by:
Something I read a couple months ago seems quite pertinent, to the extent that I accept the premise that the US in its present form is doomed to crumble like all past empires: Closing the 'Collapse Gap': the USSR was better prepared for peak oil than the US. Now let's be optimistic for just a second and pretend that what passes for our government for once tries to be useful. The author Dmitry Orlov has some advice:
There are some things that I would like the government to take care of in preparation for collapse. I am particularly concerned about all the radioactive and toxic installations, stockpiles, and dumps. Future generations are unlikely to able to control them, especially if global warming puts them underwater. There is enough of this muck sitting around to kill off most of us. I am also worried about soldiers getting stranded overseas – abandoning one's soldiers is among the most shameful things a country can do. Overseas military bases should be dismantled, and the troops repatriated. I'd like to see the huge prison population whittled away in a controlled manner, ahead of time, instead of in a chaotic general amnesty. Lastly, I think that this farce with debts that will never be repaid, has gone on long enough. Wiping the slate clean will give society time to readjust. So, you see, I am not asking for any miracles. Although, if any of these things do get done, I would consider it a miracle.
In short, face up to the impending collapse and plan ahead.
Now, like Orlov, I'm pretty skeptical when it comes to the current Prez or Congress actually planning ahead. I see occasional baby steps, but nothing that has caused me to break out the proverbial bubbly. Personally, I'm all in favor of taking all that borrowed money that is currently being poured down the drain to finance the War on Terra (or whatever the hell Obama has chosen to call it these days), and, since we're never going to pay it back any way, revamp the infrastructure in preparation for an age in which getting oil imports will be considerably more difficult (somewhat related to the impending peak in oil extraction at some point in our lifetimes, but more realistically from the consequences of the Dollar eventually losing its reserve currency status - which is also an inevitability, within the space of a few years or a few decades we do not yet know). Think of revamping the railroad system - Europe and Japan have state-of-the-art high-speed rail systems that could be emulated here. Such a system would allow for transport and trade to continue from moderate distances. Get working on it, like yesterday, in earnest, and by the early 2020s we'll still be able to get around. A crash program of alternative energy research might be too little and a few decades too late, but some of what gets developed before the nation loses its means to revamp its infrastructure would in all probability be better than nothing and might actually avert a future of living quite literally in the dark.

Or we can keep collectively looking for the easy way out, pretending that there is no cliff ahead...

Monday, June 29, 2009

Interesting reads

Lenin's Tomb on why Ahmadinajad is no champion of the working classes.

From the "hope" and "change" department: Obama's regime has just bagged its first coup in the Americas. (h/t)

While unrest in Iran has received a fair amount of coverage (that typically happens when its ruling elites are sworn enemies of the defenders of American imperium), you might not know about what's been going on in Haiti (h/t Arcturus).

Speculators have been driving up oil and gas prices - again (h/t Avedon). Reminds me of a famous Vladimir Lenin quote regarding speculators. Short of Vladimir Lenin's proposed solution, I'd settle for simply shutting down Goldman Sachs for good, before they screw us with yet another speculation bubble (h/t BLCKDGRD).

Michael Jackson died for our sins. Recommended background reading that might be insightful not only for understanding Jackson's life, but our own lives and culture: Alice Miller's For Your Own Good.

Sunday, June 28, 2009

A picture is worth ten thousand words

Image found at Paul Krugman's blog. Krugman goes on to say:
...temperature is a noisy time series, so if you pick and choose your dates over a short time span you can usually make whatever case you want. That’s why you need to look at longer trends and do some statistical analysis.


What this tells me is that annual temperature is indeed noisy: there have been many large fluctuations, indeed much larger than the up-and-down in the last decade or so. But the direction of change is unmistakable if you take the longer view. The fitted line in the figure is a 3rd-degree polynomial, but any sort of smoothing would tell you that there is a massive upward trend.

Of course, trend-spotting is no substitute for causal modeling; and the models are getting truly scary in their implications.
John Cole also looks a bit at the "climate contrarians" who've been naysaying for too damned long.

In particular, I thought the Krugman post was useful in reminding readers that in order to understand what is happening with the planet's climate, one is required to search for long-term trends using what is rather noisy data (that is, data in which there is a great deal of variability). In the case of global warming, it appears that the signal, even with all the noise, is coming in crystal clear.