Congress and the Inflation Crisis Greg’s Note: Mish called me today and said “Congress is looking at speculation in Google.” “Really?” I replied. “That makes no sense.” It seems Mish was pulling my leg. Congress is actually looking into speculative oil trades. “That makes more sense,” I suggested. “Not really,” replied Mish. Confused? You won’t be for long. Mish plays a little game of “Mad Libs” to see if he can’t prove it. Enjoy, and send responses to your hoping-Congress-would-stop-passing-silly-legislation managing editor here: greg@whiskeyandgunpowder.com Whiskey & Gunpowder
November 13, 2007
By Mike “Mish” Shedlock
Prairie Grove, Illinois, U.S.A.
Double Standard Time
RECENTLY THE FINANCIAL TIMES PUBLISHED an article about Congress’ oversight when it comes to speculative trading in crude oil. Why would congress take an interest in speculating on crude oil but not when it comes to stocks, treasuries, or CDOs? Something doesn’t seem to match up here, so we’re going to have to take a look to see if this really makes sense. The Financial Times article can be found here, U.S. Congress Takes Aim at 'Speculative' Crude Oil Trades. Lets play a little game and see if substituting “Google,” “Bear Stearns,” or “stock prices” for oil makes as much sense. ~~~~~~~~~~~~~~Special~~~~~~~~~~~~~~ Demand is High and Supplies are Limited You can learn how to profit from the coming boom in renewable energy by acting now. Your chance to receive our elite report detailing your specific opportunities is right here, but only until November 20 at 5:00 p.m. Only 2,500 reports will be sold, and they are quickly running out. This limited offer also includes four months of our new resource stocks service, free. Don’t miss out on this exciting opportunity. Click here to learn more… ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Here is a retake of the above article with some slight modifications: “‘Right now, it is funds and speculators who invest in oil Google — and financial markets interfere with the oil stock market,’ [Secretary-general of OPEC Adbullah] al-Badri said in Vienna. “The idea that speculators — often used as shorthand for hedge funds — may be trading in a way that results in unusual price movements has gained traction among some U.S. lawmakers… “As chairman of the Senate Permanent Subcommittee on Investigations, [Sen. Carl] Levin produced a report this year on ‘excessive speculation” by collapsed Bear Stearns hedge funds Amaranth in natural gas CDO markets on the New York Mercantile Stock Exchange and the Intercontinental Exchange, an "over-the-counter" platform. Mr. Levin, energy consumer groups, and some utilities bagholders say this hit consumer prices want their money back… “Since the collapse of energy trader Enron, the Commodity Futures Trading Commission has charged 63 companies and individuals for violations in the sector, and obtained more than $300 million in civil settlements… “In the U.S., lawmakers New York Attorney General Andrew Cuomo, angered by the lack of a legal basis for the CFTC to fully oversee trading in OTC energy markets are to strike out at Washington Mutual directly, is pushing legislation to widen the agency’s powers his power to sue federal banks. “Last week, Congressman Peter Welch of Vermont introduced a bill to require ‘government oversight of the trading of unregulated energy commodities Google stock trading to prevent price manipulation and excessive speculation.’”
Think about it. Why is it that speculation in Google, Treasuries, CDOs, asset-backed mortgages, etc., is all welcome, but speculative trading in oil is not? The root of the problem is not speculation, nor is the problem the high price of oil. The root of the problem is economic conditions that foster, and even encourage, speculation in oil, commodities, gold and silver, currencies, and high beta stocks like Google, Apple, and Research In Motion. Bernanke and the Fed purposely foster inflation. This drives down the value of the dollar and encourages speculation. Ron Paul vs. Bernanke Ron Paul blasted Bernanke in Congress last week as seen on this YouTube video. Following is a transcript: “We [need to] get down to the bottom of this and define what inflation is, and not look at only prices. This was taught by the free market economists all through the 20th century. They said, 'Beware, [the central banks] will increase money supply, but they will make you concentrate on prices. And they will give you CPIs and PPIs and fudge those figures.' “We ignore the fundamental flaw, and that is not only have we had a subprime market in housing, the whole economic system is subprime in that we have artificially low interest rates. This has been going on for 10 years or longer, and now we are bearing the fruits of that policy. “Instead of looking at consumer prices, which nobody in this country really believes, we need to talk about the distortion, the malinvestment, the misdirection, the bad information that is gotten from artificially low interest rates. In many ways, people refer to you as a price fixer. You fix interest rates. When the Fed fixes interest rates at 1%, that is price fixing. “The real deception is when we distort the value of money, when we create money out of thin air. “We have to get back to the very fundamentals of where this problem [bubbles] comes from. And the bubbles occur when we have mal-investment and the creation of new money. “So my question boils down to this: How in the world can we expect to solve the problems of inflation — that is the increase in the supply of money — with more inflation?”
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Mish P.S.: The government may be doing their best to legislate what we can and cannot speculate on, but that doesn’t mean that profits from commodities can’t be found. Readers with a subscription to my paid service, The Survival Report, have seen the wealth that can still be made. Click here to see the plays that I’m still recommending… | 
