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what is really behind Rising Oil Prices
Prior to 1999, the so-called "Too Big To Fail" commercial banks were forbidden to invest in the
commodities and stock markets by the Glass-Steagall Act of 1933. These banks were restricted to core
banking activities of taking in deposits and making loans.
After Glass-Steagall was repealed by Congress in 1999, these large banks started investing huge
sums of other people's money in both of these markets, helping to create large asset "Bubbles" (or price
increases) followed by "Crashes (or price dips) when they pulled out of these assets.
The year before Glass-Steagall was repealed, subprime loans made up only 5% of all mortgage
lending. By 2008, these loans made up 30% of all mortgage holdings by banks. Knowing that these
type of loans were much more likely to default than "normal" loans, the banks had the former loans
bundled into packages called "Mortage-Backed Securities". They were given false credit ratings and
sold to unsuspecting investors. When these loans started to default, it caused the subprime crises.
The large banks then moved into the commodities markets. Oil is sold on the commodities market
and requires only a 5% upfront deposit to control large amounts of it without taking actual
possession! The large banks -- with their access to huge amounts of other people's money to speculate
with -- have an unfair advantage over other investors who use their own money. These banks are
consequently driving up prices during bidding. Some experts say this speculation by the big banks is
driving up prices in the commodities markets by 20% or greater.
The Glass-Steagall Act needs to be restored. In addition, the margin cost to purchase oil
by anyone outside the oil industry needs to be increased (e.g., to 50%).
There really exists an excess of oil on the markets. Even refineries are only operating at 80% or less
capacity. Artificial shortages (and the consequent price manipulations) are being created by tying up
oil supplies using only a 5% investment.
But none of this is news to those in government and finance. It is how the "game" is played today
and how lots of easy money can be quickly made. The problem lies with:
● Many Legislators (on both sides of the political aisle) who receive "kickbacks" by passing
favorable legislation or cutting back on Government oversight regulations;
● Official regulators who are "in bed" with the "Too Big To Fail" institutions who have mismanaged
hedge and pension funds.
The irony is the solution lies with American voters. The problem is that too many in
public office are tempted by the "kickbacks" or invitations to participate in such speculation schemes.
There are 5 financial lobbyists for every congressman and senator! The quick (if not unfortunate)
solution is to not to re-elect incumbents. A better solution (albeit difficult) is to elect only those who
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have no previous government service experience and who are not associate "players" in the militaryindustrial complex about which Dwight Eisenhower previously warned the American public.
Additional Material
Glass-Steagall Act (http://en.wikipedia.org/wiki/Glass-Steagall_Act )
Commodity Futures Modernization Act of 2000
(http://en.wikipedia.org/wiki/Commodity_Futures_Modernization_Act_of_2000 )
"Inside Job" documentary about the 2008 Global economic crisis
(http://en.wikipedia.org/wiki/Inside_Job_(film) )
"Big Banks Cash In on Commodities" (Wall-Street Journal)
(http://finance.yahoo.com/banking-budgeting/article/112847/banks-commodities-wsj )
(also archived at http://www.stealthskater.com/Documents/Banks_Commodities.doc
and http://www.stealthskater.com/Documents/Banks_Commodities.pdf )
"The Warning" -- the hidden history of the Nation's worst financial crisis since the Great
Depression and the Legislative Action (prompted by Alan Greenspan among others) that
suspended existing Commodity Futures Trading Commission oversight on the risky OTC
derivatives market. The latter's crash helped trigger the Nation's financial collapse of 2008 and
the subsequent multi-billion bailouts of those "Too Big To Fail" banks. In addition, the
members of the Dept. of the Treasury "President's Working Group" coerced Congress to
eventually cause the resignation of the CFTC's head Brooksley Born. One, because she dared
to regulate the derivatives market (thereby costing millions of dollars of easy money to
influential persons). And two, because she was a Washington "outsider" (and a woman to
boot!) (PBS/FrontLine)
(http://www.pbs.org/wgbh/pages/frontline/warning/etc/script.html )
(also archived at http://www.stealthskater.com/Documents/The_Warning.doc
and http://www.stealthskater.com/Documents/The_Warning.pdf )
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