According to an article by Matt Taibbi in Rolling Stone Magazine, Investment bank Goldman Sachs is largely to blame for the oil price hike due to their machinations to drive up the price. This site has long suspected that speculators and not market demand and supply were what was causing the price of oil to go up.
And what caused the huge spike in oil prices? Take a wild guess. Obviously Goldman had help — there were other players in the physical-commodities market — but the root cause had almost everything to do with the behavior of a few powerful actors determined to turn the once-solid market into a speculative casino. Goldman did it by persuading pension funds and other large institutional investors to invest in oil futures — agreeing to buy oil at a certain price on a fixed date. The push transformed oil from a physical commodity, rigidly subject to supply and demand, into something to bet on, like a stock. Between 2003 and 2008, the amount of speculative money in commodities grew from $13 billion to $317 billion, an increase of 2,300 percent. By 2008, a barrel of oil was traded 27 times, on average, before it was actually delivered and consumed.
Its quite a controversial article since it names key Goldman Sachs alumni who were or are working for the US government and accuses them of helping protect the bank’s investment interests by virtue of the bailout as well as turning a blind eye to their practice of creating artificial investment bubbles. Primarily the internet bubble of the late 90’s, the current housing bubble and the oil price bubble.
The author breakdowns the banks self serving operation in this paragraph:
Goldman positions itself in the middle of a speculative bubble, selling investments they know are crap. Then they hoover up vast sums from the middle and lower floors of society with the aid of a crippled and corrupt state that allows it to rewrite the rules in exchange for the relative pennies the bank throws at political patronage. Finally, when it all goes bust, leaving millions of ordinary citizens broke and starving, they begin the entire process over again, riding in to rescue us all by lending us back our own money at interest, selling themselves as men above greed, just a bunch of really smart guys keeping the wheels greased.
It also points out that the bank is now setting its sights on the carbon credit market which it says will be the new bubble market for them to prop up. If you go to the Goldman Sachs website right now you will see that it is indeed into green investing.
Goldman is once again back to its old business, scouting out loopholes in a new government-created market with the aid of a new set of alumni occupying key government jobs.
Gone are Hank Paulson and Neel Kashkari; in their place are Treasury chief of staff Mark Patterson and CFTC chief Gary Gensler, both former Goldmanites. (Gensler was the firm’s co-head of finance.) And instead of credit derivatives or oil futures or mortgage-backed CDOs, the new game in town, the next bubble, is in carbon credits — a booming trillion- dollar market that barely even exists yet, but will if the Democratic Party that it gave $4,452,585 to in the last election manages to push into existence a groundbreaking new commodities bubble, disguised as an “environmental plan,” called cap-and-trade. The new carbon-credit market is a virtual repeat of the commodities-market casino that’s been kind to Goldman, except it has one delicious new wrinkle: If the plan goes forward as expected, the rise in prices will be government-mandated. Goldman won’t even have to rig the game. It will be rigged in advance.
What’s scary is if the carbon-credit market turns into a bubble and collapses, is that its not only the investors money that will be lost but the credibility of a system that was engineered to help protect the environment. One could even go as far as to call it a devious orchestration, since they first propped up the price of oil, which creates the interest for green investing, then make money off of both. Another harsh reality is that people will always look to firms such as Goldman Sachs to help invest their money because they have a good track record of creating wealth.
Category: Oil, Carbon Credits, Oil Price, Financing
July 8th, 2009 at 8:38 am
why wouldn’t they?
and the article says this will be a gov’t created bubble via policy so goldman won’t have to work as hard…..but that they have goldman cronies in virtually every nook of public office….the scary thing is that part is true…personally i would not bet against it
Goldman would want you to believe his accusations in the article are akin to conspiracy theories of litte green men picking you out of your bed at nite and having their way with you…..or something equally absurd…..but all matt does is say their is vast corruption that has built up over the years in banking as well as all the leverage goldman execs have by holding public office and the list is long….nearly everyone that gradudated high school and looks at the revolving door between private sector and public office back to private sector with perhaps a stop as a “regulator” would be wise to look at what they have done…..and know they will at least try to get another bubble goin