Free market Waterloo

Free markets are mostly a very good thing. But when the concept is
applied to life supporting less elastic essential resources, the problem
of the ego and the desire for power overcomes the good that would
otherwise flow from such unfettered pursuit of "happiness"/"property".

Nowhere is this more obvious than in the current fiasco of oil prices.
Having compiled wealth into the hands of the few, the few are now waging
a feudal war for control of the life's blood of the planet:

"'free trade' -- despite the well meaning wishes of the idealists --
ends up concentrating wealth and power into the hands of the greedy-
selfish" says retrogrouch.....

http://newsbusters.org/node/6858 --------------------------

Media Ignore Enron Connection to Higher Oil and Gas Prices
Photo of Noel Sheppard.
By Noel Sheppard | August 9, 2006 - 09:58 ET

(...)

On June 26, Senators Norm Coleman (R-Minnesota) and Carl Levin
(D-Michigan) released a comprehensive report detailing how speculation on
various commodities exchanges around the world is impacting energy
prices. Six weeks later, virtually no media coverage has been given to
this bipartisan, 60-page study that should have been of great interest to
Americans with gasoline over three dollars a gallon.

Even more curious than the lack of media attention to this report was its
continued reference to Enron, a regular target of the press in the past
five years. The Senate study strongly pointed an accusatory finger at
"The Enron Loophole," a part of the Commodity Futures Modernization
Act of 2000, approved by Congress and signed into law by former President
Clinton on December 21, 2000.
-------------------------------------------------------------------

(The foregoing phraseology is in need of attention and correction: The
Newt Gingrich deregulation crazed Congress CREATED this legislation and
then dared Clinton to veto it. It was not created by Bill Clinton and the
Democrats and then "approved by the Congress". Bill Clinton, at the time,
was under heavy assault:

http://www.eagleton.rutgers.edu/e-gov/e-politicalarchive-Clintonimpeach.htm
On January 12, 1998, Ms. Tripp also provided the tapes of her
conversations with Ms. Lewinsky to Independent Counsel Kenneth W. Starr,
who had been appointed to investigate charges relating to the Whitewater
real estate venture in Arkansas of the President and Mrs. Clinton.

(...)

On January 15, Starr obtained approval from Attorney General Janet Reno,
who in turn sought and received an order from the United States Court of
Appeals, to expand the scope of the Whitewater probe into the new
allegations.
--------------------------------------------------------------------
Clinton had less power than a wet noodle.


http://newsbusters.org/node/6858 --------------------------

First, some background: in 1936, President Franklin Delano Roosevelt
signed into law the Commodity Exchange Act, which was designed to create
greater government oversight of commodities markets after the collapse of
grain prices in 1933. This Act has been regularly amended by Congress as
these markets have grown and evolved, and was set for reauthorization on
September 30, 2000.

CFMA not only extended this 70-year old Act, but also detailed new
regulatory authorities for the Commodity Futures Trading Commission, the
government agency responsible for overseeing all futures trading in the
United States. At the same time, various exemptions were either created
or renewed that reduced CFTC's jurisdiction over certain transactions.
In particular, according to this Senate report:

The trading of energy commodities by large firms on OTC electronic
exchanges was exempted from CFTC oversight by a provision inserted at
the behest of Enron and other large energy traders into the Commodity
Futures Modernization Act of 2000 in the waning hours of the 106th
Congress.

(...)

The summary of CFMA from the Library of Congress also supported the
Senate's contentions:

(Sec. 103) Excludes from coverage under the Act a transaction in an
excluded commodity: (1) entered into between eligible contract
participants and not executed on a trading facility; or (2) executed
on electronic trading facilities as long as the transaction is
entered into on a principal-to-principal basis by eligible contract
participants trading for themselves.

(Sec. 104) Excludes from coverage under the Act electronic trading of
excluded and exempt commodities. States that a board of trade
designated as a contract market or derivatives transaction execution
facility may establish and operate an electronic trading facility.

(...)

Without getting overly complex, on every commodities exchange in America,
futures and options contracts carry a finite limit as to how many an
investor may hold. This is specifically designed to prevent anyone from
cornering the market on a particular commodity, much as what the Hunt
brothers did with silver in 1980.

Unfortunately, electronic exchanges do not have position limits on their
contracts. This allows large investors and billion-dollar hedge funds to
acquire a number of energy contracts significantly greater than what they
could purchase on conventional exchanges, thereby creating an added
demand on oil and oil-related products that, frankly, the system can't
handle.

Furthermore, these electronic exchanges require no Large Trader Reports
from its participants. This means that there is no routine auditing of
larger transactions that occur. The Senate report quoted CFTC Chairman
Reuben Jeffrey specifically about this issue.

"The Commission's Large Trader information system is one of the
cornerstones of our surveillance program and enables detection of
concentrated and coordinated positions that might be used by one or
more traders to attempt manipulation."

The absence of such reporting on electronic exchanges makes it easy for
large speculators to carry positions significantly greater than what
decades of commodities regulations in America have deemed appropriate for
the best interest of consumers. Moreover, it allows investors to hide
their true position in a particular commodity from regulators.

Bigger Isn't Always Better

Adding insult to injury, this condition was further exacerbated in
January of this year when the CFTC decided to allow the largest
electronic energy exchange, the Intercontinental Exchange (ICE), to use
its terminals to trade U.S. crude oil futures. Three months later, this
was amended to also allow ICE trading of U.S. gasoline and heating oil
contracts. As such, investors from all over the world can trade U.S.
energy contracts without any oversight by an American regulatory body.
------------------------------------------------------

Inelastic commodity markets must be regulated to disallow "cornering of
the markets". Cornering the market for silver doesn't destroy the economy
of the entire world.

--
"I know no safe depository of the ultimate powers
of society but the people themselves; and
if we think them not enlightened enough to
exercise their control with a wholesome
discretion, the remedy is not to take it from
them, but to inform their discretion by
education." - Thomas Jefferson
http://GreaterVoice.org/extend

.

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