It is just or more likely that the difficulty of knowing what causes what is for the opacity of the business, which one can really only know if one is in it – believe me, I’ve tried to pull from this place and numerous sites a simple nuts and bolts accounting of futures contracts and trading, and I never feel “satisfied” – if that should be the sense I’d get if I knew how it works. A nuts and bolts accounting would explain what happens to the various parties when things go wrong – e.g., I have a contract to buy your oil (alternatively, sell you oil)but I literally have no oil, I have no wells, I have no terminals, I have no where to store any oil you try to deliver. Intuitively, somebody IS going to get “hosed” or “take a bath”, so what prevents these “market failures” – in a most literal sense – from occuring? And what does that do to the over all price movements?

Maybe the fair point to Cho is the one more like Mark Thoma’s – speculation (not hedging) is part of the problem (so it ain’t just fundamentals and supply/demand) but speculation is not identical to manipulation. True. But from the point of view of those of us who have to live in the world made by capital flight from housing into commodities, WE DON’T CARE whether there’s a conspiracy of manipulation or a Pareto-inefficient outcome generated as people who do best for themselves makes everyone worse off than we would be if everyone did something different. It’s a fair point to illustrate that 57 million barrels may not be as much oil as it initally sounds to be; it is not a fair point to ignore the class and political interests that conjured up the current set of rules.

It is that point which bears repeating – as we witness false propoganda that drilling in the Gulf will fix all this (whether fundamentals or speculation). The weirdness will not otherwise cease – why just yesterday, the Republican candidate for Gubernator here in the State of Misery proposes using the state’s Division of Economic Development AND Department of Natural Resources to find all the oil left behind years ago….Of course, beating war drums over Georgia might drive oil back up high enough to make even driveway oil stains valuable.

This is an allusion to Bernanke being accountable for his bail out policy, i.e, his fingerprints will be on a smoking gun that connects wall street corruption and accounting fraud to policy actions in washington and jackson hole….