President Obama gave a speech today to the U.S. Chamber of Commerce, a conciliatory message, why he even offered up a symbolic fruit cake. But the gifts Obama is bearing ain't no house warmers, they are more offshore outsourcing, bad trade deals, corporate tax reduction wish lists and key multinational corporate players in the White House.
Would the U.S. Chamber of Commerce suddenly wake up and consider being interested in the nation that bears their name? Not from history. Remember when the U.S. Chamber of Commerce demanded Stimulus funds not be used to hire Americans or buy American? Or how foreign companies and nations are trying to buy our elections through them? Their list of egregious horrors against the American workforce is as long as their forked tongues.
Imagine this was 1904 and Teddy Roosevelt was in Office. There is no doubt instead of promising more bad trade deals and to rewrite the corporate tax code per lobbyists' demands, we would see some sort of requirement these companies hire Americans and contribute to America. Unfortunately, this is not 1904 it's 2011 and Obama sir, is no Teddy Roosevelt.
There would be no pretense of a cold war, Obama and big business have been pals since day one. Face it, the U.S. Chamber of Commerce has more money than God, can sway Presidential elections, more power than nation-states and no one, not even the President of the United States will take them on. Hell, without them, politicians never would have even got there.
Trade Reform has published the text of the speech with no comments. I will assume they were horrified.
Some of what President Obama said was useful, such as businesses are sitting on top of $2 trillion in cash and not hiring Americans and not investing in America.
Think Progress notes the futility of trying to get a lobbyist organization, front loaded with offshore outsourcing interests, to create jobs in the U.S. and hire Americans. In the article, Leaders Of US Chamber Awarded Themselves Record Compensation While Slashing American Jobs , Think Progress just touts a few items from the U.S. Chamber of Commerce's labor arbitrage laundry list:
– In 2010, Naivstar CEO Daniel Ustian increased his total compensation by 27%, from $6.64 million in FY 2009 to $8.43 million in the year that ended October 31. The company has enjoyed healthy profits: in 2009, it earned $320 million, or $4.46 a share, and in 2010, it made $223 million, or $3.11 a share.
– Navistar has slashed jobs at factories across the country. In Springfield, Ohio, Navistar laid off 250 workers from a truck assembly plant. At its plant in Arkansas, the company laid off 477 in 2009 after letting 300 workers go in 2008. Amid the layoffs and plant closures, Navistar, a major military contractor, opened a new factory in Mexico last year.
Telecommunications Giant AT&T Is On The US Chamber’s Board Of Directors:
– AT&T CEO Randall Stephenson was awarded a compensation package valued at $20.3 million in 2009, a jump of 35% from 2008. Last year, AT&T devoted an extra $8.99 million into Stephenson’s pension plan, ensuring that his retirement will include a pension “equal to 60 percent of his highest average salary and bonus in three of his last 10 years at the company. Although he’s not currently eligible for retirement, his pension is valued at an estimated $31 million today.”
– In recent years, AT&T has aggressively downsized its American workforce. In 2008, the company killed over 16,000 jobs as the recession hit. But in the last two years as AT&T enjoyed record profits, the company announced layoffs of “hundreds” in Kansas, 96 in Reynoldsburg, Ohio, 150 in Connecticut, 525 technicians in California, and 140 jobs in Oklahoma.
Agricultural Manufacturer Deere And Co. (John Deere Company) Is On The US Chamber’s Board Of Directors:
– Samuel Allen, the CEO and Chairman of Deere and Co., was awarded a compensation package in 2010 three times the size of his pay in 2009. Allen’s compensation was $12.29 million in 2010.
– As Deere and Co. recorded high profits, the company slashed jobs. The company killed 367 jobs in East Moline, Illinois, 325 in Iowa, and 89 jobs in North Dakota.
Health Insurance Company WellPoint Is On The US Chamber’s Board Of Directors:
– In recent years, WellPoint has reported record profits and extraordinary executive compensation. In 2009, WellPoint CEO Angela Braly was awarded a 51% compensation boost from $8.7 million in 2008 to $13.1 million.
– During the same period of high profits and highly compensated executives, WellPoint shed thousands of jobs. In 2009, WellPoint laid off 1,500 employees across the nation. Following the first round of layoffs, the company got rid of an additional 136 jobs in Missouri and 111 in Wisconsin. Notably, during this same period WellPoint’s trade association secretly transfered $86 million to the Chamber to fight health reform.
Public Citizen points out Obama is getting it wrong on trade and jobs:
It’s unclear what is more mortifying: President Barack Obama choosing the club of America’s notorious job-offshorers to talk about the importance of creating American jobs, or his rallying of his fiercest political opponents to help him overcome the majority of Americans who oppose more-of-the-same job-killing trade agreements and pass a NAFTA-style deal with Korea that the government’s own analysis shows will increase our trade deficit.
The U.S. Chamber of Commerce audience must have been thrilled to have Obama push more of the trade agreements that both help them offshore American jobs and, given that most Americans oppose more of these job-killing trade pacts, can help them achieve their political goal of replacing Obama in 2012.
After winning key swing states by pledging to reform America’s job-killing trade policy, I suppose the Chamber is about the only place that President Obama could go to rally for more-of-the-same trade policies as if these had not resulted in a huge trade deficit and the net loss of 5.1 million manufacturing jobs and 43,000 factories since America started its experiment with the current trade model in the 1990s.
Not to leave all references, left, the Washington Examiner really blasts this speech with Why is Obama meeting with group that launders Chinese money?
This visit will spur a slew of articles on how Obama is "tacking to the center," becoming more "pro-business," and "mending relationships." This will mostly be bunk. The president is still selling the same Big Government product he's been peddling since the stimulus, and the Chamber is still buying the same corporatist product it's been buying since, well, the stimulus.
The worst of it is, these multinational corporations have no intention of creating jobs to hire Americans or investing in America. These are the same people who demanded TARP, no reform on executive compensation, more derivatives, FIRE, financial institutions, even larger, love TBTF, demand corporate welfare, breath systemic risk, demand China is allowed to currency manipulate and generally attack anything that could help the U.S. workforce, the U.S. middle class that has been proposed over the last 30 years. You can kiss their ass 'til doomsday and all you will get is some seriously puckered lips.
Where O where is that big stick?
Navistar will close Melrose Park Illinois Engine Plant within 3 yrs.
Navistar got 225 Million in Recover Zone Facility Bonds - low interest, tax exempt
Navistar has a bond rating of BB-
Navistar has laid off over 200 employees in the past 2 yrs.
Navistar muscled 20Million from a small town in Illinois
Navistar got 64 Million from the State of Illinois
Navistar is closing their Fort Wayne Indiana locations and eliminating 1400 employees
Thanks for posting this comment. I would like to see the "big picture" list of corporations who have gotten tax incentives, even cash from local, state and even Federal governments on the promise of economic development and jobs for their areas, only to have that corporation pocket the money and move to China and India.
I know IBM has done it and there are many corporations doing the same behavior. Recently we had a "green solar panels" companies get millions in grants and tax incentives to pocket the money and move to China.
This is plain wrong, at minimum these companies should be required to pay the money back, with interest, since they did not do what they said they would originally to get these tax breaks, grants and other incentives.
Navistar once employed nearly 10,000 in Ft Wayne. Their suppliers and service providers employed many more. They closed the mfg operations in the early 80's, even after much incentives offered by the city. as a consolation, Navistar agreed to keep the engineering operations quality control and test facilities in Ft Wayne. The Southeast side of the city never recovered from the loss of good paying jobs and once very nice neighborhoods fell into disprepair, a micro version of Flint MI
Navistar recently decided to complete the pull out, again despite many concessions from the city AND a major tax hike in Illinois. Company officials only paid token attention to city officials, the deal was already done despite an infrstructure in Ft Wayne to support manufacturing operations and a much lower cost of living than suburban Chicago
I'd love to see a city sue a corporation
demanding their money back plus interest. The promises, commitments made, are just broken with no consequence. Know anything about the legal angle, has this been considered, dismissed, precedent?
I don't think Ft Wayne
I don't think Ft Wayne pursued it any further - the writing was already on the wall and they already spent a lot of money on it.
The only "successful" one I can think of was when Chrysler renegged on a new plant in Tipton County IN. Courts ordered Chrysler to repay around 14 million in incentives and abatements. however this was right before the bankrupcy, so not sure if the county ever collected anything - if they did was probably pennies on the dollar
Propaganda and Rhetoric
What exactly does anyone really expect Mr. Obama to say or do? Is he not a member of The Washington Brotherhood? Is he not just another professional politician, playing the same game mastered by many before him? After his first two years in the oval office, is it really that difficult to figure him out, and understand his real intent? Can we really expect anything other than the propaganda and "business as usual" rhetoric, flowing freely from the mouths of those we've entrusted with the well-being of this nation and her citizenry? Have we not been down this exact same road for the past half century of non-representative government? For all of those that live in a fairy tail world, and those that exist by habitual wishful thinking, there is no pot of gold at the end of the rainbow, nor will the tooth fairy slip a million bucks under your pillow, sorry.
Addressing the topic :
Yes, it is a well know fact that unfair, unjust, and one-sided foreign trade agreements and policies have taken many jobs out of this country. It's also true that those agreements and policies are directly responsible for closing plants and factories, lost industries, and our present day import dependency. We must also remember that it didn't happen by accident or chance, but was engineered and executed by The Washington Brotherhood over many decades. And, we must also realize and understand how The Washington Brotherhood is given the power to destroy this nation's ability to prosper and enjoy economic independence. It doesn't take an MIT graduate, nor a Philadelphia lawyer, to figure out, that for the most part, The Washington Brotherhood is comprised of mere puppets, that dance to the tunes played by the rich, the powerful, the influential, and the corporate elite. The fact is that John Q. Public doesn't vote on the floors of Congress, nor have a voice in the oval office.
There are many building blocks that make up the present devastating economic climate, that has us sinking in the abyss of debt, poverty, unemployment, and economic dependency. Among them, as the root article so very well noted, is job out-sourcing, which is basically condoned and encouraged by Washington, and for the most part, goes unpenalized. This anti-America practice is founded and based solely on greed. With close to 27 million American workers ( including recent high school and college grads ) either unemployed, under-employed, or have given up looking for work, the out-sourcing of jobs remain an every day practice among business America. Yet, we hear Mr. Obama ask the business community to stop the anti-America practice, and hire American workers instead. But, has he asked Congress to legislate change?
Its been said that money is the root of all evil, and corporate American has made a truism of those words. Greed has influenced our government, our economy, and our future. The power no longer rest with the people, but has been transfered to the those only concerned about their wealth, power, and their influence that controls the anti-America puppets of The Washington Brotherhood.
Because you can do wrong, and get away with it, doesn't make it right
Interesting phrase considering Egypt. What makes my own blood boil is when policies, legislation and agendas we know kill jobs and do not help the economy are touted by these politicians as helping the economy.
I've pointed to it many times, but there is a group of economic "theory" and "research" that claims "outsourcing is good for America". The thing is, only someone with a math degree is going to be able to read those "papers" and see major, gapping manipulations, biased assumptions, flaws to make their "conclusion" work out.
That, irks me most of all, spinning agenda with phony numbers.
Osellout and the US Chamber
Robert Reich also has a good article on this today -
Obama’s Deal with the U.S. Chamber of Commerce
…….I’ve been watching (and occasionally trying to deal with) the Chamber for years, and all I know is it has a deep, abiding belief in cutting taxes on the wealthy, eroding regulations that constrain Wall Street, cutting back on rules that promote worker health and safety, getting rid of the minimum wage, repealing the new health-care law, fighting unions, cutting back Medicare and Social Security, reducing or eliminating corporate taxes, and, in general, taking the nation back to the days before the New Deal.
So what, exactly, is the deal Obama is pitching to the Chamber?
……Virtuous cycle? American businesses are doing quite nicely as it is. Their profits are soaring. And one reason they’re doing so well is they’re holding down costs, especially payrolls. So why would they ever agree to add more workers now?
……. Not long ago I debated a conservative economist who argued American workers had priced themselves out of the global labor market and would therefore have to settle for lower real wages and benefits before they’d be hired back in large numbers. By his logic, many health and safety regulations would also have to be compromised or abandoned, since they also make American workers more expensive.
If this is the tacit bargain the President is offering business, it’s not a good deal for American workers.
There’s no secret to creating lots of jobs by reducing the median wage, slashing benefits, compromising health and safety at the workplace, and, effectively, reducing the standard of living of millions of Americans. We’ve been doing it for years.
And it doesn’t lead to a “virtuous cycle.” It leads to the kind of economy we’ve had for years – including, right now, the most anemic recovery from a deep trough since the mid-1930s. Indeed, when the debt bubble popped in 2008, we discovered how many Americans no longer had the ability to buy enough to keep the economy going. In this and other ways, 2008 bore an uncomfortable resemblance to 1929…………..
believe this or not
Their lobbyists must be an army. Literally it was clear they had paid manual comment spammers for blogs to write up nice sounding crap in response to posts....it's actually one of the reasons all things are moderated on this site. No glorified lobbyists comments, or businesses trying to put in a bunch of links for free. They can buy an ad but the content of this site stays "regular folk driven".
Their damage with "white paper spin" is beyond belief and it's very clear they have more legislative writers than Congress. i.e. they write up legislation, with some nice tricks to hide what they are doing, one of the reasons we're getting 2000 page plus bills with references to other acts via a "semi-colon", often introduced without even legislative text in the Congressional record, yet magically passed.....
many of these amendments, even full bore bills, are written not by our Congress and their legislative staff, but by lobbyists and their legislative staff (attorneys) to be dumped into our laws pretty much any time they want it.
That's just positively disgusting. Never mind now Obama has literally let them into the White House, there isn't even a pretense of separation of government from multinational corporations at this point.
Truth Is Obvious
Well, if job out-sourcing was good for our economy, and our workforce, why haven't we seen any signs of it? If our participation in the global market place was beneficial to American manufacturing, why haven't we seen signs of it? If the relocation of American businesses to points outside of our borders was beneficial, why haven't we seen signs of it? If bringing in foreign workers was a huge boost to our economy, why haven't we seen signs of it? If subsidizing American businesses that export American jobs was beneficial to American workers, why haven't we seen signs of it?
The point is that, through government engineered economically damaging policies, we've sacrificed our own economy in order to pad corporate bottom lines, and to boost foreign economies. Again, I say that this was not by accident nor chance, but intentional selfish self-service.
In the first place, there's not enough numbers and stats to express the harm done to our economy, our economic well-being, and to the future of this once great nation. On Main Street America, the "truth" is obvious. Secondly, it is very unlikely, and even ridiculous to think, that noone in Washington saw this coming decades ago. If a dumb country boy like me saw it coming way back in the 60's, surely those very close to the process knew.
We've allowed ourselves, through trust and optimism, to be oppressed and suppressed by a government believing itself to be an entity unto itself, answerable to noone except itself. The root article does a great job of expressing the pain felt by our workforce. What explanation could possibly justify what has happened to our economic well-being? The American worker is not lazy, uneducated, unskilled, nor inexperienced. There's no justifiable reason why we must stand in long unemployment lines, depend on government assistance programs, and live in shelters, all for the benefit of a relatively small percentage of Americans.
When I hear those politicians, especially Mr. Obama, say that American businesses should invest and start hiring, I can't help but laugh. In the first place, American businesses are not turning away business because they don't want to staff-up to meet demand. That's silly even to imply such. Secondly, business America wouldn't hesitate to hire more employees if they had demand for their products and services. Afterall, isn't that how businesses grow? Business America is not hiring because there's no demand for their products and services. The demand is for cheap foreign made goods, and cheap foreign labor. Contractors aren't turning away hundreds of thousands of home buyers, and textile mills aren't turning down orders for bolts of cloth. With millions of Americans unemployed, almost 44 million living in poverty, and many more homeless and living in shelters, where's the spendable income to support the American retail market?
Mr. Obama can ask business America to invest and hire until he faints, but business America doesn't hire just to be hiring, and they won't hire until their business merits adding additional employees. What Mr. Obama could do to encourage business America to hire, is to create a level playing field for American businesses. This, as I've said for many years now, could be accomplished through fair, equal, and balanced foreign trade. In addition, there must be severe penalties for job out-sourcing, and also for businesses that relocate outside of our borders. We need to strictly enforce our immigration laws, and severely punish anyone that breaks them.
There are ways to put America back to work, but it'll take a pro-America government seated in Washington to do it. We can get back on a path to economic independency, but it won't be via unfair, unjust, and one-sided foreign trade agreements and policies. And, it won't be by our continued practice of out-sourcing our jobs to cheap foreign labor. I will agree to a point, that our economic woes are such that it'll require complex and complicated measures to remedy. But, as the old saying goes, "an honest effort is better than no effort at all". We have to start somewhere, and that starting point has to be Washington DC. We can not continue our "blind patriotism", and expect things to change. We've basically worn that path out, and we can all see where it lead us. We must stop allowing the smooth talking silver tongued politicians from getting our votes. Our votes are our voices, and is the only thing we have to fight the establishment with.
America wants to work, citizens want to be self-supporting, and our workforce deserves better than what they're getting out of our government.
Because you can do wrong, and get away with it, doesn't make it right
signs of it
one can see signs of offshore outsourcing in total labor costs, operating costs being slashed, on how Indian body shops profits soar, increasingly larger GDP, while the U.S. is having a jobs slaughter, India couldn't find enough workers. You can see it in Foxconn employee lists, almost a million, in China, in China's trade exports, in the U.S. trade deficit, it's all over the place yet magically one cannot get anything past Blinder to say this just might be a problem for the American workforce.
Exactly The Point
So true, and so sad at the same time. I do feel sorry for the American worker, and feel for their pain.
Cutting through the chase here, it is not the fault of the worker, nor is it the fault of corporate America. Yes, corporate America works the strings that move our puppet government, but our government willingly allows it. In other words, greed moves the strings, and the thirst and hunger for power and influence motivates the actions on the other end of those strings. As I've said many times, legislation and policy are dictated by Lobbyists, which controls the U.S. Congress. The operative word was "Lobbyists", just in case anyone missed the point. Considering the untold $Billions that have passed through the hands of Lobbyists, is there any doubt that legislation and policy is bought and paid for? And to think that there are folks out there that still believe that we have a government by the people, and for the people. Pleeeeeeeeeeeese !!!!
Yes, we have, and continue to do so, supported the economies of India, China, Korea, Japan, and many others. I remember back in the 50's when I was just a small kid, going into Ben Franklin's five and dime store, and almost everything in the store was made in Japan. As the years went by, the shelves in almost all stores were filled with products from many more countries. Today, it's hard to find very many products on shelves with "Made In U.S.A." labels. What we're seeing, and have grown accustom to, is the "Wal-Mart" syndrome.
I remember when the steel mills closed, when the last American made TV disappeared from stores, and when foreign made cars and trucks became common on American streets. I was working in the textile industry when it began to fold under pressure from cheap imports. Did the American worker cause our markets to be flooded with cheap imports? Not hardly. It was our government that sold us out to foreign interests via corporate greed.
Lets face the cold hard facts here for a moment, please. Our standard of living doesn't allow us to compete with foreign labor. We can't work for $5.00 a day. And, we have labor laws that will not allow us to work children under sweat shop conditions. Also, we must comply with OSHA, EPA, and other restrictions. The math is simple, we can not produce a bath towel for $.15. There was a time when only union workers could afford union made products. So, non-union workers bought cheap foreign imports. This was the beginning of economic disaster for the American worker. Slowly, over several decades, union membership has drastically declined. ( reference the steel, textile, automotive, and other unionized industries ). But, even without union wages and benefits, we still can't compete with cheap foreign labor. Why, you may ask? Because we're not a third world economy, yet.
If we continue to be import dependent, there's no way for us to create enough jobs to keep pace with our rapidly growing population. In addition, as job out-sourcing to foreign countries increase, our service sector will soon fall in step with the near collapse of our manufacturing sector. In fairness, I must point out that advances in technology is responsible for some job losses. We've advanced in such a way that we can produce more with less manpower. Machines and computers have replaced many workers. But, that doesn't account for what we're seeing across the board.
We must ask ourselves, considering the extremely high cost of an "unemployed America", is cheap foreign imports really cheaper than American made products? Is it really cheaper to out-source service jobs to foreign labor markets? Before you answer, give some thought to the amount of taxpayers' dollars needed to fund government assistance programs, poverty, subsidies, bailouts, and unemployment for 99 weeks. Then consider the lost industries and the ghost towns of the rust-belt. Consider the cuts in local, state, and federally funded services, lost tax revenue from payroll deductions, and the unemployed with families that have lost everything, including their homes. It's not a pretty picture, is it.
The term "Global Economy" basically means "equalization to the lowest level". The sooner our derelict dysfunctional apathetic government realizes that, the sooner we might be able to go back to work, and once again become an independent self-supporting economy. But, don't bet the farm on that happening just yet. First, alot of voters afflicted with "blind patriotism" has to awaken to the cold hard facts.
Because you can do wrong, and get away with it, doesn't make it right
Good Article and Comment
What you are both describing is really the dark heart of GLOBALISM, and I have good news.
Globalism in it's present form is OVER.
Globalism, the pet system of the Trilaterals, the Bilderberger's, the Rothschilds and the other generational banking dynasties that spawned it, is NOT sustainable under the current paradigm of monetarism.
As more and more wage earners (like me, and Robert Oak and Sonny Clark) come to realize that AUSTERITY is just a code word for BAILOUT when the public tolerance for "BAILOUTS" has ended, those wage earners are going to become extremely PISSED at the lies, the greed, and the inhumanity of globalism.
And I think we're also beginning to understand that behind all the smoke and mirrors, if you keep your eye on the pea beneath the bankers shell and refuse to be mesmerized by the misdirection, what we are really seeing is a massive devaluation of wages and savings relative to the monetization of debt, which in turn is the result of continuing these stealth bailouts of massive fraudulent monetary obligations to debt.
And what we are really bailing out is a fantasy world prepared by Bankers to lure wage earners into malinvestment, to believe that home values will never fall, and that we can all have good paying jobs producing nothing of relative value to the global marketplace, and everyone who wants a job either gets one or an unemployment check, and everyone gets a full belly whether they work or not (thanks to food stamps) and America can be GREAT by simply resting on the laurels of its global innovations in FINANCIALIZATION.
And what we are bailing out is the difference between REALITY and all that bullshit above, the bankers debt-trap CON.
BUT the reality is that there isn't enough productivity, or wage accumulation, or middle class wealth in that illusion (not even in the land of the opportunity) to cover the default risk of that fantasy, as expressed by the universe of financial DERIVATIVES.
Derivatives are an UNHEDGED FANTASY.
And because they are mathematically proven to be unhedged, when the money printing dislocation finally creates the interest rate risk event (probably through a complete bond collapse) that will unravel the great fantasy debt tied up in Interest Rate Derivatives, representing more than the next 20 years of true global GDP in PRINCIPLE, the INTEREST upon which cannot be paid under any foreseeable reality in this CENTURY.
The Austerity price tag of the backdoor bailout to cover these bets as they unravel expresses as hyperinflation, as we hyper-print fiat currencies to fuel the collapse. This will eventually cause the food riots and tax revolts of North Africa, Mexico, soon Europe (you're being lied to about the riots you know of and there are others not even being reported yet) and eventually the pain of hyperinflation will usher in the end of monetarism.
The global elite will have finally saved humanity from itself by purging the world of useless eaters not essential to the system. We don't know what the new system will look like, but it is a mathematical certainty that the old system is suicidal, and humanity will end it (violently, I'm afraid) as an alternative to extinction.
There must be enough pain worldwide to cause people like me, Robert Oak and Sonny Clark to say "Screw this, I've got nothing left to lose." And that's means we're so fed up we stop paying taxes if we still have jobs, or we lose our jobs, and we lose title to our homes, and we're out on the streets panhandling as the brown shirts line up to keep order and we're all tired and hungry and fearful of a military coup, or worse. When there's no blood left in the turnip it's over.
But as long as we remain "civilized" we take it up the "O-zone" because it's still better than Armageddon. Well, when Armageddon finally comes, it's a self fulfilling prophecy.
The only way out of this mess is for human nature to dramatically change. We can't predict what will make that happen in a positive way, but a new dark age will certainly do it in a rather harsh way, depending on how badly we want to make it rain down on us -- the longer we kick the can, the harder the fall.
And when you look at it that way, why would anything Obama says or does have any bearing on anything? Behind all that right-sounding rhetoric and cheerleading, he's biding his time just like we are. And "Hoping" for "Change".
globalism is over
I don't think you can tell that to the corporations running the globe until the last dog dies. In other words, they seem to be insisting on complete global collapse before they would even contemplate what they are doing, long term to the U.S. economy (at minimum).
I'll assume you're talking about interest on the debt. Here's something I'd like to dig into more and that is derivatives w.r.t. physical commodities, i.e. cooper, oil, food, wheat and so on. There is the never ending argument for one must take possession of the physical commodity at some point, but....are there newer "derivatives" which make that "not so" and/or is it a game of hot potato in order to churn flash profits, last one standing is left with holding the real losses bag?
You're gonna love this
Oh yeah, it's the game of collateralized commodity obligations. These money changers synthesize EVERYTHING.
From Naomi Prinz at Mother Jones:
Additionally, the hot new favorite among traders is betting on packages of energy and agricultural futures. Called CCO's (collateralized commodity obligations), they are like their subprime cousins, CDO's (collateralized debt obligations). Their performance is linked to rising commodity prices; the higher the prices, the more profit to the CCO.
And of course this jewel from Ellen Brown:
Kaufman explained this financial innovation in a July 16 interview on Democracy Now:
Goldman . . . came up with this idea of the commodity index fund, which really was a way for them to accumulate huge piles of cash for themselves. . . . Instead of a buy-and-sell order, like everybody does in these markets, they just started buying. It’s called "going long." They started going long on wheat futures. . . . And every time one of these contracts came due, they would do something called "rolling it over" into the next contract. . . . And they kept on buying and buying and buying and buying and accumulating this historically unprecedented pile of long-only wheat futures. And this accumulation created a very odd phenomenon in the market. It’s called a "demand shock." Usually prices go up because supply is low . . . . In this case, Goldman and the other banks had introduced this completely unnatural and artificial demand to buy wheat, and that then set the price up. . . . [H]ard red wheat generally trades between $3 and $6 per sixty-pound bushel. It went up to $12, then $15, then $18. Then it broke $20. And on February 25th, 2008, hard red spring futures settled at $25 per bushel. . . . [T]he irony here is that in 2008, it was the greatest wheat-producing year in world history.
. . . [T]he other outrage . . . is that at the time that Goldman and these other banks are completely messing up the structure of this market, they’ve protected themselves outside the market, through this really almost diabolical idea called "replication" . . . . Let’s say, . . . you want me to invest for you in the wheat market. You give me a hundred bucks . . . . [W]hat I should be doing is putting a hundred bucks in the wheat markets. But I don’t have to do that. All I have to do is put $5 in. . . . And with that $5, I can hold your hundred-dollar position. Well, now I’ve got ninety-five of your dollars. . . . [W]hat Goldman did with hundreds of billions of dollars, and what all these banks did with hundreds of billions of dollars, is they put them in the most conservative investments conceivable. They put it in T-bills. . . . [N]ow that you have hundreds of billions of dollars in T-bills, you can leverage that into trillions of dollars. . . . And then they take that trillion dollars, they give it to their day traders, and they say, "Go at it, guys. Do whatever is most lucrative today." And so, as billions of people starve, they use that money to make billions of dollars for themselves.
Other researchers have concurred in this explanation of the food crisis. In a July 2010 article called “How Goldman Sachs Gambled on Starving the World’s Poor – And Won,” journalist Johann Hari observed:
Beginning in late 2006, world food prices began rising. A year later, wheat price had gone up 80 percent, maize by 90 percent and rice by 320 percent. Food riots broke out in more than 30 countries, and 200 million people faced malnutrition and starvation. Suddenly, in the spring of 2008, food prices fell to previous levels, as if by magic. Jean Ziegler, the UN Special Rapporteur on the Right to Food, has called this "a silent mass murder", entirely due to "man-made actions.”
It's all gonna end when the worlds wage earners collectively go off the grid.
thanks LTF, blog post?
What I'm gunning after is proof solid, that one can basically have commodity futures exceed the actual physical demand available. i.e. proof that it's speculation vs. global actual real world physical demand and supply, which can cause prices to increase.
I could see that from esp. CDSes, they had made them "non-linear" by allowing anyone to buy insurance against something they plain didn't own.
So, I will assume that somewhere, there has to be similar non-linearities which would then violate the law of physical supply/demand, i.e. CDO^2, CDO^3, CDS and so on, where they allow others to bet against, pile in, on a payout that has now become non-linear, at least in volume, to the original derivative.
See what I'm gunning for? Right now we have our rogue bloggers, which is Naked Capitalism, Zerohedge and others saying this is speculation, then you get your more international economics saying one has to have physical supply, therefore, this is pure global demand and lack of supply....
Then, we have the infamous blame the fed and I don't quite buy that with floating exchange rates and even pegs in other nation-states, the prices are not flying through the roof in comparison to Egypt...
So, I think I've got one of the issues boiled down to non-linearities, i.e. the secondary derivatives and any CDS like things, causing # speculative derivatives to greatly exceed those who must take possession of actual physical quantity.
if you're got others who have nailed this, consider explaining to the rest of the class on EP in a blog post. We have LaTex (mimetex) on here and image upload for graphs. Any help with this kind of thing I will for I imagine such a piece would require heavy graphing and possible mathematics.
I just don't quite "get" it yet and that's in spite of studying all of those MBS derivatives in gory obnoxious, mind blowing mathematical and mnemonic roadblocks.
The proof is in the pricing
If you can see how credit default swaps are non linear because the counterparty is buying insurance against something he "plain doesn't own", then the commodity futures analogy is that counterparties can hold any type of speculative position on commodity futures without ever intending to take physical delivery.
You can even hold a one million dollar position with 500 dollars while Goldman uses the remaining $999,500.00 to bet on the default of the Greek 5 year bond (for example).
Surely we can see how oil as a commodity is finite, unlike agriculture, which is much more seasonal (cyclical, replenishable). The demand for both oil and food increase with population growth and development. But the outrageous price fluctuations in oil cannot be supply related, because the supply has been continually diminishing and the demand continually increasing for decades.
In a natural supply and demand price equation, oil should have started rising from about $10 dollars a barrel in the 70's to something like $20 in the 80's, $30 in the 90's, $40 in the 00's per barrel, and so on (thats a "crude" calculation I know, but I'm just trying to show a steady natural increase in prices due to relative fixed supply against increasing demand - pun obviously intended).
But with Goldman Sachs parking millions of barrels of oil in Contango and other such speculative power plays, the prices have been volatile. Any idea how many times a barrel of oil gets traded (speculated upon) before the end product reaches consumers at the pumps? About 27 I hear lately. There is no natural supply and demand explanation for oil to peak at $140 a barrel, then collapse to $40 within 5 months in 2008.
When the real interest rate is negative, courtesy of the FED (extended and exacerbated by 300 trillion in unhedged interest rate swaps) it doesn't make economic sense to hold cash. When the paper is going down, real assets have a much better chance of holding value, through inflation.
With foreign currencies, tech stochs and real estate all busted flat (in that order) commodities are the last logical choice for the next bubble. It's a self-fulfilling proposition and yet another positive feedback loop -- the higher the commodities price, the higher the inflation pressure, and therefore the higher the commodities price ... and so on. Just like with oil. Self replicating profit based on speculation, a.k.a. financialization. It's not that complicated or hard to do really if you have no conscience and don't mind the hardship, homelessness, famine and death toll you'll arbitrarily inflict upon people who did you no wrong, just to make a buck (me, I work for a living like the rest of us suckers, but when I shave in the morning I can still live with the face in the mirror).
I doubt that the "official statistics" offered by "international" media outlets including the FED, are anything more than herd control. Do you actually believe that inflation in the U.S. is holding at 1.5 to 2% as Zimbabwe Ben claims? Is your grocery bill only 2% higher than last year? How about your insurance costs? How about gas? How about your utility bill? Property taxes? Any new fees being assessed your way like our Fire service fee last year in Leon County Florida? My comparisons all substantiate a 12-15% average inflation of basic necessities, like commodities. But Bernanke factors in the housing collapse (deflation) against real inflation, when in fact we all know that home prices are no "deflating" just due to natural supply and demand pressures (though mounting foreclosures do add fuel to that fire) but rather home prices are "normalizing" as a result of an asset bubble correction.
Globalists want us to believe that capitalism is alive and well, even recovering, along with all the civic trappings of basic economics we were taught in grade school but which no longer apply. Capitalism is no longer practiced in global finance (I digress into corporate global fascism only to remind readers that propaganda from cooked statistics has always been their hallmark).
I don't think you'll find the concrete proof you're looking for when you consider that trillions in continuing BAILOUTS depend on hiding it. Those who pull the curtain away too early, just when the great and powerful OZ is puffing forth his last great burst of fire and steam risk ending up like JFK, and I wouldn't want to see that happen.
LOL, still CPI
I might write up a "data centric" post on CPI here, compare/look at the components, methods, historical data. On derivatives though, speculation, if we could get the mathematics, I don't have any reference on any "CDS" in commodities trading, but I don't trade commodities so I'm kind of clueless on various derivatives structures.