Capitol Hill Blue Forums Political Issues Finance, the economy & Economics Oil-Food-Water Link?

My imagination?

It seems to me that our lives are spinning faster than normal, having to do with concerns about the near future. As always, financial security is at the very base of everyones concern, outpacing the environment, the war, immigration, education, and even healthcare.

I think I see a common thread that runs through the topsy turvy changes that we are seeing in our economy, and the recent crises that have been ocurring in the financial industry.

The most recent problems of course are the price of oil, and the rapid increase in the cost of basic foods. I added water because I think this is another of the coming problems.

The common thread (and this may be a stretch) is margin buying, and attempts to corner the "market".

As we see a rapid concentration of wealth occurring mainly in the financial markets, the single major difference seems to be coming from the changes made in regulations regarding investment.

Rather than writing a treatise, I'd like to throw out a few thoughts, and let you decide if this makes sense.

It has to do with consolidation, mergers, collusion to set prices, low margin requirements, leveraged buying, anticompetitive rulings, coopted government bodies, media concentration resulting in misdirection, court hearings resulting in deregulation, and government that has abrogated it's responsibility to be fair.
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In short, it's a matter of wealthy investors controlling markets to drive up prices on a permanent basis, while taking incredible profits during the run-up. It's no longer a matter of supply and demand, as evidenced by the fact that there has been no reduction of supply, and relatively minor increases in demand.
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As long as a bubble doesn't pop, everyone involved makes money. Forget preconceived notions about supply and demand. Consider oil prices. With no reason to bid competitively, there is no upper limit to oil prices. Everyone in the buy/sell chain wins, when there is no regulation (except the final consumer).
The same thing has happened to food. There is no reason to bid competitively when there are no controls, and a ready, if not expanding market.

aside: the markets involved are those of necessities...ie. water fuel, food and basic commodities, and shelter.)

At the very heart of the entire boom in commodities, is a commodities market that has escaped regulation. Between the unregulated hedge fund and derivative markets, and a commodities market where controls have been eased or overlooked... SPECULATORS have made an assault on commodities across the board, building value out of thin air due to a market where (even though the demand is constant) there is no means for a free market to exist.

This happened with housing. In effect this was a case of leveraged buying of the collateralized securities. It happened in Japan, under the same scenario.

It happened in the LTCM debacle as a result of uncontrolled leveraged buying.

The S&L crisis though somewhat different, was a case of uncontrolled leveraged transactions.

The Hunt Brothers attempt to corner the Silver market in the early '80's was a similar situation, only stopped by government intervention.

I mentioned water, since this is another sleeping giant that may already be beyond control.

There are incredible amounts of money that have been taken out of the world economy in the past 10 years... Money that is sitting on the sidelines and being leveraged to grow in quantum leaps.

All in the name of "Free Enterprise". The term that you and I understood has been twisted to cover great crimes.
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In all probability this wandering rant won't mean much by itself. Time alone will tell if this common linkage exists, and if it can be made to last.

The test will probably come first in the commodities market. The farm industry has requested help from the FTC to control grain futures by re-introducing higher margin controls. Farmers are being backed into corners by speculators who can control pricing. To date, it appears that the government has sided with the speculators.

The traders have covered their tracks well, both with accounting obfuscations and with public relations to rival P.T.Barnum.

With the American economy beginning at the loftiest level ever, the time for natural economic factors to come into play may well be a few years. Since the poor have litle visibility and "littler" say, the "middle class" may sustain for a year or two, without true market forces realigning the balance of wealth.

The final question is: Can speculation without controls sustain in an economy where the supply side is controlled through speculation?

There are a few important factors that you do not address.

One big factor is flexibility of demand. When demand is inflexible (like oil or food) then even small shortages can result in large price swings.

Substitutes
If there is not good substitute product, then again small shortages can have a big impact.

Fear and emotional factors.
When people are afraid of shortages of an important product with no substitutes, they tend to hoard and increase a small shortage

Globalization
the "miracle" of a highly globalized economy means that it is easy to move money around and buy resources where ever they may be. Just to give an example, if the Chinese were inclined to do so, they would have enough cash money to largely corner any commodity market they choose with out using any leverage.

I think you make my case.
That is exactly what I was trying to say.
We do not have a real decline in supply. We do not have a significant increase in demand.

Speculative money is playing on basic needs, and atificially raising prices, because it can. Enabling this one way price fixing, is the fact that the removal of margin restrictions, means that speculators can leverage incredible positions in the tradeable (necessary commodities of energy food water and shelter) positions of market ownership. All of this is being done without putting capital at risk.

I'm thinking that this subject may be too complex to discuss in forums. The concept falls too far from conventional belief. I'll leave the post in the hopes that at some point I won't be the only voice, and that one of my favorite economy gurus will pick up on the conspiratorial aspects by building a cohesive argument. It's beyond my ability to bring it all together in an emperical position.

Larger and larger amounts of finished goods, fuel, raw materials, manufacturing facilities, mass media, communications and even money itself, directed into the controlling hands of an increasingly smaller and smaller group of people.

It's the cornerstone of any plan to enslave populations, and in this age of globalization, one only need to say "global population".

In short what you have is the recipe for what has been at times called "The Prison Planet".

Enjoy.

An update... Water...
India vs. Coca-Cola

India too has turned to bottle water at a cost of 1000 times the cost of public water. The Coca-Cola Plant has driven the water table down more than 24 feet in 7 years, and the city is in trouble. There is "black market" water... limited public utility water and a growing political crisis. Not a big deal... but... the bottled water market worldwide is more than $100 Billion, and it's more than $10 Billion here in the US.

The Oil-Food-Water Link ... and the commodity market control is a harbringer of the global collapse that C.S. speaks to in the previous post.

The lack of strong government controls (including foreign governments) has opened the door to disaster.

Water is just a small part of this, but will obviously grow bigger.

The rapid price rises in wheat, corn, oil, rice, amd soybeans is just a precursor of the resources grab that has now exploded into a race to the bottom. Leveraged money is enabling a brand new phenomenom, that bears out the theory of "Finite Wealth".

To understand the concept, consider the equivalence of Oil Cartels, in the entire area of natural resources.

Some of the consolidations are well underway. As far as I can see, most economists don't yet see the relationship.
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A little more here:

Increase prices by cutting supply

McDonald's to give away free chicken sandwiches

Food riots rock Somalia

our species is seriously f*cked up.

Schlack,

Too-Shay, Dude. ~SERIOUSLY INDEED~ I guess McDonalds just doesnt see a profit in giving away free food to Somalians. Maybe their money isn't good. You can't buy much with rocks.

Over population. Don't blame me - I've never bred.

Okie-Dokey, I'm gonna slide just a wee bit off topic here...


Well, Rick...maybe breeding isn't all that's it made out to be.

But, in any case, you most likely won't be blamed.

I, on the other hand, I'll be happy to take the blame.

Okay, now we can go back to: Oil, Food, Water Link topic.

Tsk Tsk TSk.

if you watch the 700 club, and you should, you will be enlightened as to the impact of Homosexuality on the state of the world. if it can be blamed for katrina, it can be blamed for world hunger.

Rick, its all your fault!

hmmm just take this a modest bit further. if you dont breed rick, whose children are you supposed to eat? talk about a lack of forward planning.