Links and Quick Takes 5/24/08

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Vast cracks appear in Arctic ice BBC

Wolf whistle works, woman strips Reuters

Earth would be very happy without humans Telegraph

How the US dream foundered in Iraq MIchael Schwartz, Asia Times. If you have time for only one item, read this. A revealing, and not too long article, that gives a very different account than the one presented in the US media.

OCC Chief Warns on Second Liens Housing Wire

The Khaki Letter Long or Short Capital

Time to do something about oil Mark Hutchinson, Prudent Bear. Key section:

Whatever the views of the IEA, it should be clear that the recent rise in oil prices is not driven by fundamentals. Economists differ about the price elasticity of oil, but the lowest plausible estimates for short term price elasticity are around 10%, with medium term elasticity being much higher. Thus if oil legend T. Boone Pickens is right that oil supplies are currently 85 million barrels per day and oil demand is 87 million, that is a supply shortfall of 2.4%, which at a 10% elasticity should produce a price increase of 24%, not 60%.

270 Illegal Immigrants Sent to Prison in Federal Push New York Times. The proceedings were a kangaroo court. This ends-justify-the-means practice is both scary and depressing. A compelling argument for respecting the confines of law comes from Roger Bolt’s screenplay about Thomas More, A Man for All Seasons:

More: Yes. What would you do? Cut a great road through the law to get at the Devil?

Roper: I`d cut down every law in England to do that.

More: Oh! (advances on Roper) And when the last law was down, and the Devil turned round on you –where would you hide, Roper, the laws all being flat? (He leaves him) This country’s planted thick with laws –man’s laws, not God’s –and if you cut them down –and you’re just the man to do it –d`you really think you could stand upright in the winds that would blow then? (Quietly) Yes, I`d give the Devil benefit of law, for my own safety`s sake.

Antidote du jour:

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  1. Legal Sodium

    “…gives a very different account than the one presented in the US media.” — i thought it gave nearly exactly the american media account.

    “…a ragtag collection of Ba’athists, fundamentalists, former military men, union organizers, democraticsecularists, local tribal leaders and politically active clerics…” — schwartz forgot the mentally retarded young women who were strapped with c-4 and “sent to protest.”

  2. Anonymous

    While there is certainly a dirth of critical assessment regarding the Iraq war Schwartz’s article would best be titled Genocide in Strawmania.

  3. Yves Smith

    I’ve mentioned this before, but I was in Australia during the run-up to the Iraq war and the war itself, and the difference in coverage was stunning (and remember, Australia was a member of the coalition). I’d almost daily e-mail my “Media Watch” list of buddies in the US and say, “This was a lead/prominent story here is Oz, is this getting any play there?” 85% of the time, the answer was no, the other 15% it was being covered, but treated as secondary or tertiary.

    The parts of the Schwartz piece I thought were noteworthy but not being covered in the MSM were:

    1, The forced acceleration (by domestic protests) of elections, the degree to which the US has interfered with them, and the Iraqi public’s awareness of that. My impression is that a lot of people here buy the Administration party line that Iraq has a democratically elected government. Even though some of the events that call that into question have been reported, the repeated reiteration of the Bush message seems to have trumped that

    2. The cooperation between Iran and Iraq

    3. The term “militia” to describe the opposition in the US is somewhat misleading in that it understates how broad-based the desire to have the US depart is, and somewhat simplifies the roles the militias themselves play. In some areas, they appear to be purely military, in others, they are part of the local public services infrastructure (if memory serves me correct, Hezbollah plays a similar role in Lebanon, providing some social services, which of course engenders local support). Thus their quasi government role makes them difficult to dislodge. Even if you can dispose of them by force, how do you deal with the lack of local rule that results? And accordingly, how do you prevent militias from neighboring areas from occupying the vacuum?

    Again, informed observers are no doubt aware of this (and much more), but I found this to be a good summary of some of the facts on the ground that are ignored or greatly underplayed in the US media.

  4. Legal Sodium

    funny, my impression is that fox buys the admins line, the nyt buys/creates the dem line, and the majority of the public (at least the people i work/soc with) buys neither. most seem to think that the iraq war in retrospect wasn’t such a good idea, but now that were there we need to finish.

    bush would help his case if he would just out-and-out say the reason we are in iraq/ the ME is that we cannot afford for the entire region to be radicalized by al-queda. we’ll be there until their oil runs out or the world’s economy can grow without it. obama will get that brief once he becomes pres, if he doesn’t know it already.

  5. Anonymous

    Mark Hutchinson, in addition to being morally loathesome in his comments, makes some huge boners about elasticity.

    First, all of the elasticity studies are on elasticity of demand in relation to gasoline prices, not oil prices, and that makes a big difference. If you look at demand relative to the rise in gasoline prices, you will see that a 15% increase in price gives roughly a 1% decline in demand. (Hutchinson’s figure of 10% comes from studies of the 70s, and is outdated. Since we’re more efficient in our energy use, studies of more recent years show much less elasticity, and elasticity is actually continuing to decrease as the price goes up. See:

    Also, consumer demand can only react to consumer prices. It doesn’t react to rising oil prices until they’re reflected in product prices, because consumers don’t buy oil, they buy product. And refiners, like most other producers, have been absorbing a lot of the increase in prices in raw inputs. (The crack spread has been cut to the bone over the past year.) So gasoline prices have risen a lot less over the past year than oil prices.

    Also, an off-the-cuff remark by Boone Pickens should not be taken as a careful study of how much demand has risen, or even of how much supply is available. Production has been roughly 85-86 million barrels per day, but energy inputs to get that production have been steadily increasing. And product actually made available to the markets has been steadily increasing because consumption is skyrocketing in the producing countries and countries like China and India, where consumption is subsidized and consumers have seen only a small fraction of the rise in oil prices.

    Better numbers are easily available, and they ain’t Hutchinson’s.

    Moe Gamble

  6. Anonymous

    This is Moe again: My comment should say “product actually made available to the markets has been steadily decreasing (not increasing).

    Also, take a look at the most recent Commitment of Traders report, which came out Friday:

    Look for “Crude Oil, Light Sweet”.

    Speculator positions are in the categories of “Non-Commercial” (hedge funds, index funds and the like) and “Nonreportable” (the smaller traders.

    As of 5/20/08, speculators were net long only 19,443 contracts (spread out through the entire curve), and this was before the big spec profit-taking day on the 22nd. Commercial traders were net short only 19,443 contracts.

    In August of 2007, as the price neared $78, speculators were net long (and commercials were net short) 119,688 contracts. In December of 2007, just before the correction after oil reached $100, speculators were net long (and commercials net short) 100,506 contracts.

    With speculators net long such a small amount, it is literally impossible that they are responsible for the price rise in oil. You could kick all specs out of the market on Tuesday and the price would drop about $2–and that would last only until China started buying the dip.

    Moe Gamble

  7. retread


    You repeatedly throw supposed facts about with no support, I’d really like to see some.

    For instance, “Better numbers are easily available, and they ain’t Hutchinson’s”. Great, if they are so easily available, why didn’t you provide links to them?

    Show us the goods. In all the comments you have made here, I don’t remember seeing a single citation. Why should I trust you over Boone Pickens? He was a real oilman, and now a big punter, and I would assume highly connected too. He must have had lots of people who worked for/with him who have on-the-ground information.

    And you seem to be perilously ignorant of the fact that speculators can and often are classified as commericials under the Swaps Loophole, so you data about speculators playing a small role is wrong (really can’t be proven either way) because the CFTC lets certain speculative positions be classified as commercial.

    So what does this say? Either you know far less than you claim to, or are knowing dubious information around. Per Mark Masters’ testimony before Congress:

    The CFTC has granted Wall Street banks an exemption from speculative position limits when these banks hedge over-the-counter swaps transactions.21 This has effectively opened a loophole for unlimited speculation. When Index Speculators enter into commodity index swaps, which 85-90% of them do, they face no speculative position limits.22

    The really shocking thing about the Swaps Loophole is that Speculators of all stripes can use it to access the futures markets. So if a hedge fund wants a $500 million position in Wheat, which is way beyond position limits, they can enter into swap with a Wall Street bank and then the bank buys $500 million worth of Wheat futures.23
    In the CFTC’s classification scheme all Speculators accessing the futures markets through the Swaps Loophole are categorized as “Commercial” rather than “Non- Commercial.” The result is a gross distortion in data that effectively hides the full impact of Index Speculation.

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