Sabbath 27/3/31/120

Dear Friends

On 23 May 2008 Anatole Kaletsky, Associate editor of Britain’s The Times and a well know economic commentator, wrote an article titled “A crude detachment” concerning the crisis of the escalation of oil prices. He considers this even more serious than the credit crunch, which he declares seems to be passing, at least in the US.

We are all aware that crude oil is now over $US 130 a barrell with predictions of $US 150 and $US 200 to come. Such prices will do far more damage to the World economy than the credit crunch.

The “Oil crisis” will introduce a prolonged period of global stagflation. This will see interest rates rise to the previous terrible levels of the later 70s and earely 80s. This lethal combination will be a disaster for the world economies and seems to be deliberately induced and is being supportedd by world leaders who refuse to do anything about it. Brown of UK, the Australian Parliament in its entirety and the mental midgets of the US Neocon Globalisation systems.

After we have a look at the question of whether there is actually an oil crisis or not and examined the question as to whether it is a plastic bubble or not we will turn to a recent essay by Henry Kissinger which might add some more uneasy insight into where these Quasi-Leninist nut cases, calling themselves Neocons in the US, are leading the world in their quest for International Socialism. They are actually International Fascists not National Socialists or Nazis as we knew them in the first half of the Twentieth Century. We will examine this farce later.

Instead of just causing a brief recession, the oil and commodity boom threatens a prolonged period of global stagflation, the lethal combination of high inflation and economic stagnation last seen in the world economy in the 1970s and early '80s.

This stagflation disaster will be far more lethal than the loss of a few million homes or the collapse of the odd bank. Uninformed in not understanding the mechanics of what they are doing, are inducing the catastrophe deliberately and the world philosophers are failing to come to grips with the logic of what is in fact a global conspiracy run by a corporate elite bent on the destruction of national sovereignty in all continents. This is allegedly a threat to the stable globalisation of the world economies through the central bank systems set up in national economies.

As Kaletsky points out: “Commodity inflation is far more lethal than a credit crunch for two reasons. It prevents central banks in advanced economies from cutting interest rates to keep their economies growing. Even worse, it encourages the governments of developing countries to turn their backs on global markets, resorting instead to price controls, trade restrictions and currency manipulations to protect their citizens from the rising costs of energy and food.

For both these reasons, the boom in oil and commodity prices - if it lasts much longer - could reverse the globalisation process that has delivered 20 years of almost uninterrupted growth to America and Europe and rescued billions of people from extreme poverty in China, India, Brazil and many other countries.

That is the bad news. The good news is that the world is not as impotent as is often suggested in the face of this danger, since soaring commodity prices are not the ineluctable outcome of some fateful conjuncture of global economic forces, but rather the product of a typical financial boom-bust cycle, which could be deflated - especially with some help from sensible political action - as quickly as it built up.”

The present crisis displays the classic symptoms of a financial bubble such as we saw in the Japan bubble of the 80s. The Dot com. Collapse in the 90s and the Housing and mortgage crisis in the US which milked untold millions from local government councils around the world including Australia and untold overseas banks. This is indeed a bubble but it is deliberately engineered.

Contrary to popular belief the present commodity and oil boom is not driven by shortages of supply.

We are being told that the Oil Shortage” is caused by China's insatiable appetite for food and energy (and that of India) exacerbated by geopolitical conflicts in the Middle East with the peaking of global oil reserves and the  droughts caused by global warming and so on?

Some of these arguments are valid some are not valid nor are their conclusions true. The justification for these massive oil price rises is simply not there. It is a massive Confidence trick and an artificially induced bubble. There is absolutely no reason why oil should be where it is or rise any further.

Kaletsky is one of the first to apply sound analysis to examine the fundamentals in the relevance to the oil price rise.

Correctly we can see that the stated fundamentals are all irrelevant. Just ask which of these fundamentals has changed in the past nine months. The answer is none.

China didn’t suddenly demand oil nine months ago and nor did India. This cannot explain the doubling of prices since last August. The fact of the matter is that, China's so-called insatiable demand for oil in its growth pattern has decelerated.  In 2004 it was consuming an extra 0.9 million barrels a day; in 2007 it was consuming just an extra 0.3mbd. In the same period global demand growth has slowed from 3.6mbd to 0.7mbd. As a result, the increase in global demand growth is now well below last year's increase of 0.8mbd in non-OPEC production, according to Mike Rothman of ISI, a leading New York consulting group. So who is kidding who? Why is the oil price where it is? The answer is that it was hiked there by speculators who may well have damaged the economies of their nations and should be investigated and placed on trial and imprisoned. Such an investigation is now underway by Federal US authorities and former Enron officers are also being examined.

What about rising commodity prices that are being claimed? Many no longer are rising. Rice, wheat and pork are 20 to 30 per cent cheaper than they were two months ago. Asian and African food riots were allegedly the first symptoms of a commodity super-cycle that would drive prices much higher.

Kaletsky pointed out that the price of industrial commodities such as lead, zinc and nickel, supposedly in short supply a year ago, have now dropped by 40 to 60 per cent. In fact, most major commodity indices would already be in a downtrend were it not for the dominance of oil.

Does the latest jump in prices proves that demand for oil really does exceed supply? Such is not the case and has not been the case over the last year. It is a speculator induced crisis aided by the globalists.

Kaletsky argues that it is a normal financial bubble. He is correct about one thing and that is that there is no shortage of oil and indeed the US has enough domestic oil reserves to supply its own needs for 200 years from the Alaskan north slope fields alone. Coupled with Canada and the Gulf it need have no shortage for the entire millennium ahead.

Kaltesky correctly points out that ”in the late stages of financial bubbles, it is quite normal for prices to become completely detached from economic fundamentals. House prices in Florida and Spain kept rising even after property developers built far more homes than they could possibly sell. The same thing happened in credit markets: mortgage securities kept rising even while banks created special purpose vehicles to acquire vast inventories of bonds for which there were no genuine buyers; and dozens of similar examples can be cited from the bubbles in internet stocks and Japan. Similarly, the International Gold Council reported this week that gold demand for commercial uses and investment fell 17 per cent in January, just as the gold price surged through $US1000 for the first time.“

The Persian Gulf, according to Rothman, is crammed with supertankers chartered by oil-producing governments to hold the inventories of oil they are pumping but cannot sell.

The excess supply of physical oil at today's prices does not mean that producers are somehow cheating by storing their oil in tankers or keeping it in the ground.

What is happening is that there are few buyers for physical oil cargoes at today's prices and they cannot be sold. There are however plenty of buyers for futures contracts linked to the price of oil next month and next year. This is having the effect of creating a total bubble which will really hurt the world’s economy and its daily trading capacity.

What has been created is a self fulfilling momentum of a boom bust cycle analogous to the sub-prime crisis which turned into a bubble where no one wanted to buy sub-prime mortgage bonds but rather there was a demand for financial derivatives that allowed investors to bet on the future value of the bonds. The values of the CDOs were inflated by fraud and that is not examined by Kaletsky nor is it being properly examined under the Bush Administration because they were part of the problem. Nor has it been examined by the relevant Ministers for Local Government in Australia because it would unearth a political scandal of immense proportions and show that they have been negligent in the enforcement of their duties and effective protective legislation

Correctly it is pointed out by people like Kaletsky and George Soros that the standard economic assumption that supply and demand drive prices is not only inadequate for understanding financial markets, in boom-bust cycles, the theory is totally wrong (George Soros The New Paradigm for Financial Markets). Soros explains the start of financial bubbles with some genuine economic transformation, e. g. the internet, the deregulation of credit or the rise of China as a commodity consumer etc.  We have been through these bubbles before many times. The South Sea Bubble of 1720 for example arose from the dominance by Britain of the global sea lanes. In that bubble for example the brewer Sir Charles Cox who was the MP for Southwark, Surrey in the reign of Queen Anne and the man who virtually single handedly saved the entire Palatinate German Protestant population from destruction at the hands of the Catholics was ruined in this speculative bubble.
 
These speculators and the bubbles they create produce a self-fulfilling momentum of rising prices and an inbuilt bias in the way that investors interpret the world. Their greed makes a gambling interpretation of financial markets Their misconceptions drive market prices out of equilibrium where there is no relation to the balance of supply Instead of just causing a brief recession, the oil and commodity boom threatens a prolonged period of global stagflation, the lethal combination of high inflation and economic stagnation last seen in the world economy in the 1970s and early '80s. This would be a disaster far more momentous than the repossession of a few million homes or collapse of a couple of banks.
and demand.

Kaletsky rightly points out that: “The people who tell you that commodity prices today are driven by economic fundamentals are the same ones who said that house prices in Britain were rising because of land shortages. The amazing thing is that just months after losing hundreds of billions in the housing and mortgage bubbles, investors and governments across the world have reverted to the discredited fallacy that financial markets always reflect economic reality, instead of the boom-bust cycles and misconceptions that Soros's book vividly describes.”

Now the problem seems to be obvious. Either, we are run by complete self-serving idiots; or they have another agenda. There may be a combination of both but the program of globalisation is too consistent and destructive to be a benign move by intelligent altruists.

The blockading of ports by French fisherman and of roads by British truck drivers are not enough. These people have to be identified and recognised for what they are and removed from office and their agenda dismantled. There must be investigations world wide into what these people are doing.

We need to understand what these Globalists are really up to and how that affects the plan of God and that will follow in the New Moon Message.

Wade Cox
Coordinator General.