With the G20 having just ended, Canadians are thinking about what was accomplished in the “mega-meetings” and if they will help produce economic stability for a world which is standing on the edge of a financial abyss.
Within days of the meetings, renowned economist Paul Krugman predicted a “Third Depression” (NY Times – June 27/10) which will be characterized by prolonged periods of deflation and unemployment. There had been hope that there could be solutions to the plaguing economic problems which are facing the entire world. “A Third Depression”, in Krugman’s analysis, is another “correction” which will be deeper, longer and more painful than the one in the fall of 2008 – not the news we wanted to hear after investing so heavily in the G20.
Personal Income: 1.5 Billion a Year.
A recent Time Magazine article profiled a hedge fund manager whose earnings for 2009 were 1.5 Billion dollars which averages to about 6 million dollars a day. His job: he trades commodities for a “living” – if you could call $1.5B a year a living.
The questions I am asking is how much money do you have to make for your company for them to pay you a billion and half dollars a year and where does that all that money come from?
It isn’t all that complicated. A hedge fund is the “pretty” name for a speculator. Using government approved financial instruments, the trader can multiply his purchase ability by 100 times the amount of his on-hand cash – we are talking hundreds of millions of dollars at a time. The leverage is an important aspect of the “free market” sham. With enough leverage (money) your trades can influence the market. Of course a “good trader” is betting the price will go up. When you look at it, it’s kind of like fishing in a barrel. It’s not really much of a gamble and it sure isn’t investing.
When oil hit $140/ barrel it had nothing to do with the cost of production or supply. An oil analyst interviewed on CBC claimed that oil at $60/barrel is very, very (lift an eyebrow) profitable for oil companies. When it hit $140 a barrel, it was the work of speculators.
Unregulated speculation of commodity prices like oil, grains, and real estate have inflated prices beyond what people can afford. The first collapse only partly deflated prices because the Federal Reserve (Baranke) and the US government and the banks insisted on pumping up the balloon with a trillion dollars of printed money. When prices exceed what people can pay, consumption goes down and unemployment goes up. So to fix the problem, they have to deflate commodity prices back to where (more) people can afford them. But they didn’t do that.
Speculators were allowed to pump up commodity prices again using our bail out money creating an illusion of recovery but leaving prices inflated, consumption low, and unemployment high. Hence, they have called this blip in the market, “The Jobless Recovery”.
Governments and regulators never made any significant correction in the system which allowed the speculators to continue to manipulate commodity prices. Furthermore, they have increased taxes to compensate for falling revenues (Ontario) which is the equivalent of inflating prices. The result – more than 20% of Americans are sacrificed on the altar of “Free Market”. Of course, there is nothing free about a market that is being manipulated and there is nothing free about a nation that is being held hostage and plundered by its enemies.
The wealth of the nations is being siphoned off by speculators who manipulate prices of commodities to extort obscene profits from everybody on earth. Governments stand by as these pirates pillage and plunder, in many cases, generations of work and savings through a sophisticated “shell game”. They even speculate on food, raising prices which literally starve people to death and no one does anything. (See Food Riots – Mogadishu, May 5 2008). Could there be anything more repulsive than billionaires gambling on food futures at the expense of peoples’ lives?
Krugman calls the problem “policy failure” – he’s being kind. It is “human failure” which caused the problem and it is the failure to “end the party” (through regulations) that will drive us into the Long Depression. The G20/G8 meetings were about as effective as painting the Titanic – there is a hole in the boat! We are all in that boat together. Unfortunately, there is not magic “bullet” that will fix the problems. The system is fatally flawed and it is only a matter of time until we see another “correction” to inflated prices, possibly as early as this fall. Stand by……..