Monday, March 7, 2011

Just accept that you are broke while they have it all

Hedge funds and foreign currency exchange traders are betting record amounts against the USD. If you were worried about $5.00 gasoline, don’t bother, worry about having anything to eat. Of course it could be just a tempest in a tea pot in order make a few billion for the big money people. Make no mistake, this is a manmade crisis, but every time they do this scam they run the risk of it getting completely out of hand.

If you happen to bear the brunt of one of these little forays into free market capitalism the starvation is very real. Already one in five Americans qualifies for food stamps and the system is not that generous, many more are having a hard time with real food security let alone any have any realistic hope of achieving the American Dream.

There are 400 million gallons of gasoline used in the US on a daily basis. Just a 50 cent hike in price translates into 200 million USD per day consumer “tax” that is paid to the rich just as if they were feudal lords. You won’t see any tea baggers protesting this “tax“, they are funded by the Koch brothers who get a big chunk of the proceeds.

If these billions aren’t enough, the Wall Street banks have another scam to play off of this “crisis”. They sell derivatives, a derivative amounts to a short term insurance policy against price swings. They sell them to companies at risk from prices going up for all manner of things that are bought and sold, not just fuel. They also cover the risk of buying at current prices and being stuck when the market collapses. Pension funds buy them to try to protect themselves which comes out of your retirement. The big money is selling them to hedge funds that are just placing bets.

It’s sort of like setting the town on fire and then selling insurance, but not just to the people at risk of losing their homes but selling them to people in the next town who are betting that somebody else’s house will burn. This is what brought down the world economy in 2008 and not mortgaging too many houses for brown people. This bubble is conceivably bigger than the 2008 bubble since the same players are still at it (thanks to 14 trillion in bailouts) and they are even bigger than when they were declared “too big to fail” by the Bush Adm.

The cost of buying “protection” is passed along to the consumer in higher prices besides the actual rise in energy costs. That is if your company can do that, some can’t as they are already being pinched by the weak economy and that will only get worse as this crisis deepens. More failed businesses, more jobs lost, this makes things worse for other companies as consumers lose jobs or have their pay cut (there’s a crisis, don’t you know). This is how you get a economic death spiral going and the Republicans who are trying to break the unions, cut the safety nets and drive down wages know full well.

The one thing you must remember is that this “crisis” is not real but they are trying to make it real. America is not broke like the rich keep saying, they just want you to accept you are broke while they have it all.


Dave said...

History??? What's that???????

It's not going to be very nice but it's going to be interesting. That is. . .for those who live through it.

Anonymous said...

The cost of buying “protection” is passed along to the consumer in higher prices besides the actual rise in energy costs.

Just like all costs (taxes) put on corporations are passed on to the consumer. Yet, you want to tax corporations. Awesome, it will all be passed on to the consumer.

Anonymous said...

Michael Moore "America is not broke"

And Michael Moore is not fat. ... whatever you say. ...

prairie2 said...

Michael Moore is fat? He keeps his fat the same place I do, yours is in your head.

prairie2 said...

The "corporations pass taxes along to the consumer" myth again. Taxes are paid on profits and can't by definition be passed along because that would require more profits that would be in turn taxed.

The cost of paying big banks for protection against the chaos caused by the same big banks is passed along. Otherwise it cuts into profits which is the point, smaller companies that can't pass it along lose money and fail. Companies that don't make a profit don't pay any tax and don't fail.

This is why income tax is a pro-growth tax, you only have to pay it when you are doing well and not when you have a bad year or if you put the profits back into growth.

Anonymous said...

Love your blog, try to read it at least once a week.
Please answer a question I have. I was reading an article about the world wide food shortage. It said that speculators can't really drive up prices as that is a "zero sum" game. That some one has to be on the other side of the trade. Are their different ways in which speculators can take risk, drive up prices, without having some one on the other side?

quousque said...

It is hard to imagine how GOPhascist America can maintain itself after running out of financial scams, without resorting to a war bubble?

Things are going to get "weird ugly" soon.

prairie2 said...

Futures contracts don't have an other side to them but are between the holder of a commodity and a speculator. Derivatives based on the price don't involve actual commodities but serve to drive up the live markets since the assumption is that somebody would pay a higher price for a future delivery contract. The rightwing talking points on this stuff are always wrong.