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Blog item: Conspiracy Theory: The Wages of Greed is Debt

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13 comments, last: Nov-30-2008   Add a comment   Author:  PT (Nov-23-2008)
Categories: Economic/Financial, Peak Oil/Gas & Energy Demand, Philosophical & Quality of Life

Is our vast financial system being games using a classic Ponzi (pyramid) scheme?This is my opening round at writing an article on a challenging topic: the world financial system and those who make it run.  Challenging, because I will need the help of readers who know our financial and banking system thoroughly to help fill in the details. 

In fact, almost all the professionals appear to have misjudged this collapse or seen only part of the underlying causes, at each step of the way.  But if you have any insider or public, solid information, please share with me here or if you prefer, through our Contact form.

It is worth mentioning that I am also contacting economic experts through other channels that I know, in the search for the best possible information.  I am not sure whether they will have the information on this precise topic, however.

A friend of mine from New Jersey came to Queens yesterday and we had a nice lunch and chat together.  Among other topics we talked briefly about the economy, and he dropped a bombshell on me: according to him, the Washington Post reported that the real cause of the economic collapse still underway is not just bad mortgage debt and credit default swaps.  The real problem is trillions of dollars of speculation on the unregulated commodities market.  Guess what the speculation was on?  Yes, you guessed it, oil.

The Washington Post has indeed had several articles about oil price fixing, but I think I have not yet found the article that my friend refered to. I will be asking him whether he has a link to offer, or maybe will contact the Washington Post directly about it.

An hour this morning led me to many articles online about 1) the fact that the oil industry is totally price-fixed for a variety of reasons, 2) the price was driven up by concerted efforts of speculators (the exact amount of increase due to this cause seemed to be in dispute as of June), and 3) this is all being vastly underreported.

In addition, I have seen references previously to a 2 trillion dollar plus bailout that is going on behind closed doors, in virtual secrecy, and with recipients of the money that the government will not reveal.

I know I have said a mouthful.  That is why I would like to research and find out more.  As a humble software developer and Tai Chi Chuan teacher, I do not count inside-Wall-Street-reporting as one of my core skills, and I will learn what I can.  Therefore, to repeat, your educated comments or links here would be appreciated while I try to unravel more of this story.

As with the other financial commentary I have written here, the purpose is to reveal that the greedy mindset is very much in operation in our capitalist system and always threatens to corrupt the basically sound concept of rewarding intelligent and determined efforts to provide needed products and services, by paying well for them.

Our current system allows too much gaming of the system, and it appears that speculation on oil provided the vehicle for a Ponzi scheme (also known as a pyramid scheme) that the government is afraid to reveal.

To be explained:

1) Why did the price of oil rise over $145, and within two months drop back as low as $50

2) How can the worldwide, continuing economic chaos be explained by some bad mortgage debt in the United States

Come back in a few days, I hope to have an update for you.

Related PlanetThoughts.org reading:
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Click one tag to see readings related specifically to that tag; click "Tags" to see all related readings
  
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Comment by: auntiegrav (auntiegrav) (Nov-30-2008)   
Sure Steve, I'm about as cynical about the consumer culture as they come.
One problem though, is that to think our culture worships consumerism is to think that our culture even thinks about what it wants. It does not. There is no there there. Think of our culture as a boundless bundle of energy with no concept of thought behind it; sortof like a Labrador Retriever, only Americans slobber a lot more.
What bothers me most is when our 'leaders' claim when we are on top of the pile 'o dead bodies, that they led us there through forethought, yet they won't implement programs to slow us down (consumption taxes) because it would impinge on "free choice"....
Oh, the hypocrisy!
The same marketers on Madison Avenue who tell us we are making a 'choice' between Coke or Pepsi are the people who tell clients that they can get people to buy anything with scientific methods of coercion.
Can't have it both ways without killing the planet.
  
Comment by: Steven Earl Salmony (Nov-30-2008)   Web site

A culture that defines its very raison d'etre by endless accumulation of material possessions; by the unbounded acquisition of more money, money, money, money; by recklessly overconsuming and relentlessly hoarding limited resources, demonstrably declares to all the world that greed is good.

Are we not members of a culture that worships consumerism? Are the products of greed nothing more or less than the objects of our idolatry?

Are the pin-striped suits, fleet of cars, chauffeur, private jets, McMansions, distant hideaways, secret handshakes and exclusive clubs...... all signatures of success in a culture borne of the 'goodness' of greed?

Consider for a moment what greed has wrought.

Steven Earl Salmony
AWAREness Campaign on The Human Population,
established 2001
  
Comment by: auntiegrav (auntiegrav) (Nov-29-2008)   

To be explained:

1) Why did the price of oil rise over $145, and within two months drop back as low as $50

Supply/demand pricing is nonlinear. If a refinery buyer sees that his refinery needs oil to meet demand on a specific date, and he has the money to pay, then he will bid the contract until he gets the oil he needs. No conspiracy necessary, just the actions of too many people trying to drive too many places that they don't need to go without regard to the actual supply of oil. The high gas prices created a trigger when people had to choose between driving to work or paying their house payments. The collapse of the perception of perpetually growing Exurbia led to destruction of demand for oil. The forgotten part in the markets is that the supply of oil is still diminishing. ANY signs of recovery of global economic activity (increasing factory orders, increasing construction, increase in the Baltic dry shipping index), and the price of oil may go to 400 dollars per barrel. Demand may have dropped off slightly, but production is still falling around the world. This re-animation of global activity will require money, however, and right now, all of our money is based on a really big lie. There is not a reasonable way to tell at this point how much reality is going to actually hit us. Full reality check would mean a bankrupt U.S., and subsequently, a mostly bankrupt world trade system, which is currently dollar-heavy.

2) How can the worldwide, continuing economic chaos be explained by some bad mortgage debt in the United States?
It cannot, and should not, be attempted to explain this based on mortgage debt. The problem is that the complexity of financial systems and the lack of moderating regulations has created systems of debt slavery creation which far exceed the resources of the slaves. The 'free' market system is a system where decisions are made based upon PAST data history, not future logical reasoning. Anyone with a brain can say, "The earth is finite, the supply of petroleum and iron and copper is finite, so perpetual growth is impossible." However, a corporation doesn't run that way. Any group makes decisions based upon past historical data. Historical economic data shows that the economy will always grow, someone will always find new sources of energy and materials if the price is high enough, and government always causes a slowing of corporate performance. Ergo, corporations and people borrowed money based on perpetual growth, banks created leveraged systems of borrowing money from each other and insurance (credit default swaps) in case one financial instrument goes bad, they would still get their money from the 'collective' and move on, and the government was lobbied very intensely to eliminate regulations that would prevent just these types of 'free' money creation.
The explanation is not that the continuing economic problems originated with the bad mortgages, but that the bad mortgages were a symptom of an underlying bad economic model of perpetual growth and inflationary money policies. The people that made promises to pay those mortgages were no different than the executives at General Motors who made promises to pay health insurance to retirees and employees by selling SUV's.
Sometimes T-shirts cover it succinctly: "You can't have everything; where would you put it?"
The marketers and the politicians told us that we could have everything because it was our destiny. Religion kicks in and tells people they can do anything and be forgiven and rewarded somewhere in the future. The unreasonable economic policies and tax plans and deficit spending by government are all supposed to be paid sometime in the 'future'. Well, NOW is the future, and we can't pay. There aren't enough resources to pay those debts, regardless of policies which try to shove more money into the hands of people who know they can't pay any more payments.
The crisis is one of facing reality for the first time since 1929.
  
Comment by:  PT (David Alexander) (Nov-29-2008)   Web site

I had also made up an expression: There is big change in the air, and little change in the pocket.
  
Comment by: auntiegrav (auntiegrav) (Nov-29-2008)   

Yes, I made it up. You can google it and find I left it in a lot of places on the internet. Perhaps I'm the reason the economy is failing....;-) I can only hope. The best thing for this world would be for our money to become worthless. Then maybe people would be useful again.
  
Comment by:  PT (David Alexander) (Nov-29-2008)   Web site

Thanks, AG. As for the statement you make "If you want Change, keep it in your pocket" - did you make that up? It is rather clever.
  
Comment by: auntiegrav (auntiegrav) (Nov-29-2008)   

"America's 60 Families" by Ferdinand Lundberg,
"Empire of Oil" by Harvey O'connor
These are both old books, 1938 and 1958 respectively, but nothing has changed in the economic arena when it comes to who runs the government, who controls the money, and how ignorant the masses are of their own power to stop it (see "The Greening of America" by Charles Reich). In addition, become familiar with the patent system and intellectual property a little bit. Every system that is put in place (taxes, patents, environmental regulations) are designed to ensure perpetual growth without modulation of money. In the '30's, Congress investigated and decided that there were specific regulations necessary to prevent a bubble like occurred in 1929. The problem which everyone fails to see is not that Wall Street is failing and falling, but that it was growing unchecked. The regulations of the 1930's were dismantled systematically by McCain, Reagan etal in order to allow free range to the speculators. To blame things on oil speculation is a distraction from the fact that there is speculation in every market. Anyone who knows anything about the milk market knows that the price is a nonlinear relationship to supply/demand numbers. A 0.5% change in the supply can double the price of cheese. The problem with the high prices of oil, whether through speculation exuberance or not, was not the cost of the gasoline per se, but the loss of the perception of Perpetual Growth. This perception, combined with inflationary money policies by government, has been maintaining an illusion for people to make promises (go into debt) that they had no way of keeping if they faced reality. There are ALWAYS conspiracies on Wall Street and in government: it's the only way things really get done. Every corporation conspires to obtain the highest profits it can, regardless of moral implications. Morality is written by historians in the pay of the biggest thieves.
Everything in the universe comes from smaller things. Everything in our economy is designed to take from the small and deliver to the big. If there is no moderating Device (such as a consumption tax), then there is only the perpetual inflating power of the Bullies. The rich get richer because the poor give them money. Even worse, as George Carlin puts it: "People spent money they didn't have on stuff they don't need."
Your only vote is the dollar in your hand. If you want Change, keep it in your pocket.
  
Comment by:  PT (David Alexander) (Nov-29-2008)   Web site

Not sure I understand much of this, Steven. Can you explain your idea, succinctly?
  
Comment by: StevenSALMONY (Steven Earl SALMONY) (Nov-29-2008)   Web site

See the "Horsemen of the Apocalypse" ride during "blitz" of Wal Mart in Valley Stream, NY.

"Blitz" lines are a sign of the times. These 'lines' are designed to evince rampaging greed. How many other ploys can you think of that surreptitiously exploit human avarice?

Here and now we behold the chimera, the "paint horse and its pin-striped-suited rider, named GREED" being followed closely by a pale horse ridden by Death.
  
Comment by: StevenSALMONY (Steven Earl SALMONY) (Nov-28-2008)   Web site

Behold a chimera on the far horizon, a paint horse upon which imperious and ignoble GREED rides. This horse and its pin-striped rider are an unexpected front runner, a Fifth Horseman of the Apocalypse. The "Four Horsemen" in tandem are following close behind.

Steven Earl Salmony
AWAREness Campaign on the Human Population,
established 2001
http://sustainabilityscience.org/content.html?contentid=1176
  
Comment by: StevenSALMONY (Steven Earl SALMONY) (Nov-27-2008)   Web site

GUEST COLUMN by Steven Earl Salmony

November 26, 2008

Chapel Hill(NC)News

http://www.chapelhillnews.com...

Billions end up paying for excesses of the wealthy on Wall St.

Our lexicon of business activities is being expanded daily, thanks to the "wonder boys" on Wall Street. We are learning about derivatives, collateralized debt obligations, credit default swaps, recapitalization, puts, short selling and so on. We are gaining a new vocabulary from the recent meltdown of the financial system and expected slowdown of the real economy worldwide.

Where did this debacle begin? Well, it began in the center of the human community's banking and investment houses in the financial district of NYC. Supposedly, the "brightest and best" among us go to Wall Street, know what they are doing and do the right thing. Unfortunately, such assumptions turn out to be colossal mistakes.

How did this calamity occur and why is the human family in such dire economic straits? It appears that grotesque greed and a culture of corruption have come to dominate significant operating systems of the global political economy.

Powerful people in high offices within huge business institutions with access to great wealth are recklessly and deleteriously manipulating the unbridled expansion of the global economy in the small, finite planetary home God blesses us to inhabit.

Self-proclaimed Masters of the Universe have surreptitiously "manufactured" a subprime "asset bubble" and perversely fostered its uneconomic growth within the world economy. Not unexpectedly, this asset bubble did what bubbles do. The subprime bubble burst and made a mess. Global credit markets have frozen, stock prices are tumbling and the value of the dollar is gyrating.

Evidently organizers, managers and whiz kids overseeing the global economy, and the unraveling (i.e., deleveraging) of the worldwide subprime swindle are running the artificially designed financial system of the global economy as a pyramid scheme. This is to say that the international financial system is being operated so that most of the wealth funneled pyramidally into the hands of a small minority of people at the top of the world economy where this wealth is accumulated and consolidated. Note that 30 percent of annual corporate profits end up in the accounts of a tiny number of people. At the same time, the vast majority of people on Earth, near the bottom of the global economic pyramid, are left with very little wealth. Does the economy of the family of humanity exist primarily to provide wealth to the already stupendously wealthy? The "bankstas" among us evidently think so.

In the 1980s, this extremely inequitable method of distributing wealth and arranging business activities was called a "trickle-down" economy. We have been repeatedly told how this 'rational' economic scheme is good because it "raises all ships." And yet, from my limited scope of observation, the billion people living on resources valued at less than one dollar per day and the additional 2.7 billion people being sustained on two dollars per day of resources now appear to be stuck in squalid conditions. The 'ships' carrying these billions of less fortunate people (i.e., more people than lived on Earth in the year of my birth) do not appear to be lifting them out of poverty.

Steven Earl Salmony

AWAREness Campaign on the Human Population,

established 2001

http://sustainabilitysoutheast.org/content.html?contentid=1176
  
Comment by:  PT (David Alexander) (Nov-25-2008)   Web site

Thanks, WH, but actually in this case (unlike many other occasions) I am hunting for a specific story about which I have heard various bits and pieces. There has been enough smoke that there may be a fire. I have heard about a secret 2 trillion dollar bailout in several places. Then recently I heard that the 2 trillion was caused by oil speculation by large companies, and that is the real cause for the economic crisis (at least, the short-term cause). The governments want to hide this story because the oil game continues to be unregulated and would cause even greater doubts about our financial systems than currently exists. If I had more free time I would have found out all about this by now.
  
Comment by:  Wavehunter (William Coffin) (Nov-25-2008)   Web site

Good luck. If I had some expert understanding or inside knowledge I'd pass it on, but I don't. I'd suggest, however, widening your search beyond mainstream economists. They are, after all, the ones who got us into this mess.

Ecologists, however, may have a greater insight. Their message that unsustainable systems cannot be sustained seems pertinent now, and they've been saying things like this for decades. Marxists too - be they political philosophers or economists - have long predicted a systemic collapse, which may be what we are now experiencing.

Still, if you're looking for further reading, may I suggest these two articles by John Lanchester?
Cityphilia (3 Jan 08): http://www.lrb.co.uk/v30/n01/lanc01_.html
Cityphobia (23 Oct 08): http://www.lrb.co.uk/v30/n20/lanc01_.html

Plus, a thorough browse of the New Economics Foundation website: http://www.neweconomics.org/gen/

Once again, good luck!

  
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About author/contributor Member: PT (David Alexander) PT (David Alexander)
   Web site: http://www.insightandenergy.com

Member: PT (David Alexander) My lifelong pursuit, since age 18, has been to live more fully and find wisdom. This has involved studies with Zen masters, Tai Chi masters, and great psychotherapists while achieving my license as a gestalt therapist and psychoanalyst.

Along the way, I became aware of how the planet is under great stress due to the driven nature of human activity on this planet.

I believe that the advancement of human well-being will reduce societies addictive behaviors, and will thus also help preserve the environment and perhaps slow down the effects of global warming and other major threats to the health of human societies.

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