Shit Unhappens

September 25, 2006
     The story this coming week, I think, will be how much the collapse of the Amaranth hedge fund may end up infecting other "playas" in the big leagues of finance. Hedge funds being what they are -- rackets using "leverage," or other people's promises to pay, to make bets on "spreads," or differentials in other people's bets on the price of things -- there are a lot of other people out there who might get sucked through the event horizon of one big fund's black hole of bad betting.

     So far -- through the weekend of the 23rd and 24th -- the banks and other manipulators of capital have been successfully quarantined from the Amaranth infection. Sunday night, as I write, the business desk reporters are waddling back to the fridge for a second bowl of Chunky Monkey. Many of them will go to sleep in a few hours thinking that the price of gasoline is headed down further and all is right with the world.

     But the Amaranth fiasco has made about six (or is it eight?) billion of somebody's dollars disappear. Either those dollars have meaning, and those somebodies will suffer from the loss of them, and so will the people who the somebodies owe money to, or else the dollars will have had no meaning per se -- they may not have been dollars so much as IOUs denominated in dollars, or loans of bundles of IOUs, or promises of future loans of bundles of IOUs -- in which case their value as a medium of exchange will be perceived to be less than was previously assumed.

     This is what comes of living in an economy of hallucinated finance instead of an economy of wealth-generating work. It all seems to add up until the old assumptions just don't add up, and then things break down.

     This is the season when crashes like to happen. Perhaps it's something about the frost on the pumpkin, those premonitions of the dark and freezing nights ahead, that provoke hard-wired human brains to get real. When people get real and the basis of their currency looks more and more unreal, shit will happen.  And unhappen.

     Some commentators, such as Doug Noland, at Prudentbear.com, think that the liquidity game -- of evermore loans based on other loans based on promises to pay based on IOUs -- can keep this alternative universe of rackets going for a while longer. (At least that's what Doug said in an interview with Jim Puplava this weekend.)

      Myself, I think something's gotta give. There are too many real things that are going wrong. A tapped out public with no savings. A glut of houses sinking the sprawl-meisters. Nobody buying cars. Balance of payments steadily worse. Overseas adventures failing. . . .

      Despite temporary appearances, the energy predicament has not gone away. Worldwide oil production is on track to go down 3 percent in 2006. If it keeps on going that way, the 84.5 million available to the world now will shrink to something like 50 million in 2015. Ultimately that will determine the fate of our economy and the financial infrastructure that is supposed to serve it.

      A world of increasing energy scarcity will be a world that generates fewer things of value, less "wealth." All the paper "instruments" that represent our hopes that society is bound to produce more wealth will be discredited. This is a fundamental fact of peak oil, and perhaps the most implacable reality. Not only will there be less wealth, and fewer paper certificates that can be construed to represent wealth, but promises to pay back loans of putatively existing wealth will lose their credibility too. The long chains of promises to pay back this debt and that loan will be broken, and all the paper associated with those promises.

     If, however, America could find some way to harness the energy in the smoke it blows up its own ass every day, we would never face an energy crisis. Wouldn't that be the day?

Comments

[liberals in bondage]

JHK wrote:

"If, however, America could find some way to harness the energy in the smoke it blows up its own ass every day, we would never face an energy crisis. Wouldn't that be the day?"

Amen. Just waitin' on that other shoe to drop...

Can we find a way to make the smoke not tickle so much?

[kz]

JHK wrote:

Worldwide oil production is on track to go down 3 percent in 2006.

I would be curious to know where this particular fact comes from. I have not seen it stated anywhere else.

[FarmGeek]

From the little I have seen "down here" in NZ, it seems that if even these guys can get the bet so spectacularly wrong on the energy market, what chance do the rest of have to make sense of what is happeneing, or plan for a normal life in an ever more uncertain future?

[Nick Braak]

Great powers of description on the Chunky Monkey eaters :-)

[David Mathews]

I wish that the economic collapse or peak oil would just happen. Waiting around for peak oil has become so much like watching a pot boil -- a whole lotta nothing which seems to last forever (but doesn't).

Will the United States fight a war with Iran? No one knows. We'll know when the bombs start dropping, if they ever start dropping (hopefully not, never).

The whole oil bourse issue evaporated away into nothingness. Too bad ... that is, too bad that a lot of people all got caught up in the frenzy.

Christmas is coming, bringing with it another sort of frenzy altogether. The greed & gluttony of American hyperconsumerism will reign as the only god truly honored by the festivities. Jesus Himself is ashamed that obese people shop "in His honor" under the pretense that accumulating possessions is a valid method of honoring a man who possessed nothing and sacrificed everything.

The housing bubble is popping in Central Florida. "For sale" and "for rent" signs are popping up everywhere, like mushrooms after a rain. "Price reduced" and "new price" are appearing more frequently, too.

That's great. I hope that the greedy people lose money. Let them all go bankrupt.

And let the United States go bankrupt, too. If this economy survives for several more decades the present generation will not bear any of the costs associated with the trillions of dollars of debt which they accumulated.

Once the economic collapse occurs military adventures will become prohibitively expensive and that might bring an end to American warfare in the Middle East. We should abandon those nations now, while we still may do so honorably. Otherwise look forward to Americans evacuating Bagdhad in the same fashion as Saigon a generation ago.

But who knows what tomorrow will bring? Maybe business-as-usual will continue somehow for five more years. That's good in a sense but also a tragedy.

[liberals in bondage]

More on Amaranth here.

http://www.businessweek.com/investor/content/sep2006/pi20060920_196677.htm?chan=investing_investing+main

Some people just never learn.

[Anon]

Fat Dick Cheney don't give a hoot, son.

#24 Cheney’s Halliburton Stock Rose Over 3000 Percent Last Year
Sources:
Raw Story, October 2005
Title: “Cheney’s Halliburton Stock Options Rose 3,281 Percent Last Year, Senator Finds”
Author: John Byrne

Senator Frank Lautenberg’s website
Title: “Cheney’s Halliburton Stock Options Soar to $9.2 Million”

Faculty Evaluator: Phil Beard
Student Researchers: Matthew Beavers and Willie Martin

Vice President Dick Cheney’s stock options in Halliburton rose from $241,498 in 2004 to over $8 million in 2005, an increase of more than 3,000 percent, as Halliburton continues to rake in billions of dollars from no-bid/no-audit government contracts.

An analysis released by Senator Frank Lautenberg (D-NJ) reveals that as Halliburton’s fortunes rise, so do the Vice President’s. Halliburton has already taken more than $10 billion from the Bush-Cheney administration for work in Iraq. They were also awarded many of the unaccountable post-Katrina government contracts, as off-shore subsidiaries of Halliburton quietly worked around U.S. sanctions to conduct very questionable business with Iran (See Story #2). “It is unseemly,” notes Lautenberg, “for the Vice President to continue to benefit from this company at the same time his administration funnels billions of dollars to it.”

According to the Vice President’s Federal Financial Disclosure forms, he holds the following Halliburton stock options:

100,000 shares at $54.5000 (vested), expire December 3, 2007
33,333 shares at $28.1250 (vested), expire December 2, 2008
300,000 shares at $39.5000 (vested), expire December 2, 2009

The Vice President has attempted to fend off criticism by signing an agreement to donate the after-tax profits from these stock options to charities of his choice, and his lawyer has said he will not take any tax deduction for the donations. However, the Congressional Research Service (CRS) concluded in September 2003 that holding stock options while in elective office does constitute a “financial interest” regardless of whether the holder of the options will donate proceeds to charities. Valued at over $9 million, the Vice President could exercise his stock options for a substantial windfall, not only benefiting his designated charities, but also providing Halliburton with a tax deduction.

CRS also found that receiving deferred compensation is a financial interest. The Vice President continues to receive deferred salary from Halliburton. While in office, he has received the following salary payments from Halliburton:

Deferred salary paid by Halliburton to Vice President Cheney in 2001: $205,298
Deferred salary paid by Halliburton to Vice President Cheney in 2002: $162,392
Deferred salary paid by Halliburton to Vice President Cheney in 2003: $178,437
Deferred salary paid by Halliburton to Vice President Cheney in 2004: $194,852

(The CRS report can be downloaded at: http://lautenberg.senate.gov/Report.pdf)

See #24 for full article at http://www.projectcensored.org/censored_2007/index.htm

[Anon]

There's no profiteering like war profiteering.

[Dan]

I'm old enough to remember a time when a healthy sense of shame forced war profiteers to keep their ill gotten booty hidden.

[Dan]

Here's the number two bestseller on Amazon this week.

http://www.amazon.com/o/ASIN/159420098X/ref=s9_asin_title_1/002-0325001-6866466

[Anon]

#2 Halliburton Charged with Selling Nuclear Technologies to Iran

Title: “Halliburton Secretly Doing Business With Key Member of Iran’s Nuclear Team”
Author: Jason Leopold

According to journalist Jason Leopold, sources at former Cheney company Halliburton allege that, as recently as January of 2005, Halliburton sold key components for a nuclear reactor to an Iranian oil development company. Leopold says his Halliburton sources have intimate knowledge of the business dealings of both Halliburton and Oriental Oil Kish, one of Iran’s largest private oil companies.

Additionally, throughout 2004 and 2005, Halliburton worked closely with Cyrus Nasseri, the vice chairman of the board of directors of Iran-based Oriental Oil Kish, to develop oil projects in Iran. Nasseri is also a key member of Iran’s nuclear development team. Nasseri was interrogated by Iranian authorities in late July 2005 for allegedly providing Halliburton with Iran’s nuclear secrets. Iranian government officials charged Nasseri with accepting as much as $1 million in bribes from Halliburton for this information.

http://www.projectcensored.org/censored_2007/index.htm

[fyi]

JHK,
Maybe its one way to fight inflation? The disappeared dollars. Who can forget the S&L debacle? 1/2 trillion++ poof gone, where did it go? Watch for those incestuous fruitcakes, Freddie Mac and Fannie Mae that will soon explode from all the take backs they are swallowing and will swallow. Hoo-hah, might make this hedge fund stuff seem like a wet dream?
Why should we care about the hedgers losing their asses? Do we care if the bookie can't cover his bets? Record opium harvest, make room for new laundered funds.

From LIB's link(wise ass + info=goosebumps)
According to Greenberger, "the positions Amaranth took were too large to have any relationship with the underlying fundamentals" Knock,Knock, sounds like sabatoogee to me. Did I spell that right?
Now if you don't mind, going back to my WalMart security job,its times like these I am glad I am poor.
Could anybody tally up how many "Trillions" of dollars have disappeared under the Bushy eyes? Sr+Jr? When will the people learn, the smoke blowing up their asses is from a FIRE!
fyi(AKA the retard),out

[Weaseldog]

The money doesn't disappear, it got spent.

It just becomes unconnected from the mechananisms that can take it out of circulation.

It only disappeared in the sense that it's no longer Fiat Money, but now permanent money.

Money only disappears when loans are repaid. These loans won't be repaid, so the money will never disappear. But the net effect of lending, even when they are repaid is inflation.

[steve duncan]

However bad it all eventually gets the American public will be swayed to the opinion the catastrophe is all the fault of godless homos, liberals, feminists, socialist academics and Democratic elites. Pogroms will ensue, violence in the streets will rise and prayer at school and work will become mandatory. Darwin will be burned in effigy. President Jenna Bush will personally lop off the head of an octogenarian Hillary live on national television, finally slaying the beast that started all our troubles. Then everyone will get back to the business at hand, drilling holes in unguarded gasoline pipelines so they can get to next weekend's football game.

[roebuck]

"It only disappeared in the sense that it's no longer Fiat Money, but now permanent money."

Or maybe it's turned into Alfa Romeo money. Or even Lamborghini money. ;-)

- roebuck

[Weaseldog]

Steve! You're such an optimist!

[American]

Gee, I sort of hope the "story of this coming week" is the conclusion reached by our nation's intelligence agencies that the neocon war in Iraq is only making our country less safe.

Of course, the delusionally belligerent hope otherwise, and may get their wish.

[one Eye Open]

Not sue if Fiat money is scarier than "permanent" money. I mean who wants their money sitting under those cute little hairdryers waiting for the Dipidity Doo to dry. Yick!

[one Eye Open]

You better put a little ice on that Mr. Clinton. Tee hee hee.

"In an impassioned, finger-wagging answer, Clinton told Wallace, a former ABC News correspondent: "You did Fox's bidding on this show. You did your nice little conservative hit job on me. . . . You set this meeting up because you were going to get a lot of criticism from your viewers because Rupert Murdoch is supporting my work on climate change. And you came here under false pretenses and said that you'd spend half the time talking about . . . what we did out there to raise $7 billion-plus over three days from 215 different commitments. And you don't care."

Full story here:
http://www.washingtonpost.com/wp-dyn/content/article/2006/09/24/AR2006092401108_pf.html

[one Eye Open]

Bill Clinton's millstone

By John Burtis

Monday, September 25, 2006

It was sure painful to watch the old, tired, lined, and erstwhile intern's inamorato suddenly come to life in his most recent televised appearance designed to buoy his sinking legacy, triangulate his way out from under a cloud of direct suspicion for criminal inaction and the associated perfidies concerning his lackluster attempts at responding to all the attacks we suffered, when one feeble hand gripped the helm of state and the other held a slack waistband.

Just as it was pretty doggone wearisome to watch the former President berate Chris Wallace for America's misunderstanding of his past sins of omission as he strove to shore up the increasingly ramshackle political hopes of his overly strident and increasingly brittle spouse.

Funny how the pundits are worrying about the damage that this sad, pathetic former commander-in-chief can cause his wife because he forgot to protect us all for a few years as he trotted the golf links, chased the golden tortoise, groveled with a nubile youth, visited Barbra in Santa Monica, and failed to make a decision about Mr. bin-Laden standing in the gun sights.

And we all watched the string of terror attacks mount up as he called it all a law enforcement problem while Mr. bin-Laden called it all war, and mailed his declaration to Mr. Clinton, who hemmed and hawed and ordered pizzas all around.

Yet pencil pushers at the overt enemy agencies like the New York Times, the pitiable mimicking television fops like Chris Matthews, members of the White House Press Corps who manufactured acres of superb camouflage cover for Mr. Clinton during his years of hooliganism like Helen Thomas, and the Democratic leadership, who are working as hard as Mr. Clinton in the creation of a golden legacy from rotten Arkansas wood in their alchemy lab, worry that his woefully weak response to terror will hurt Hillary's chances for ascending the throne in 2008.

Sadly, this entire crowd of short-sighted progressive buffoons seem to overlook the fact that Mr. William J. "Bill" Clinton's real encumbrance, the real albatross around this nouveau riche scalliwag's neck is the same one that hangs around Sandy Berger's and at the same time drapes them both with a growing share of the seemingly endless humor which dogs their every path.

These left-wing pseudo-intellectuals, beau blades, and earless Democratic raillers seem to forget the all too visible black mark of Cain whose affliction can end many a career on the hustings -- a criminal past. And Bill Clinton and Sandy Berger, to the disgust of many of us poor work-a-day people, who are forced by the nature of the precarious situations we find ourselves in to make an honest living for the support of our families, and cannot afford to do otherwise, find former asocials, even those "self professed" "political" crooks, distasteful in nature.

In fact, many of us, when offered a choice, shy away from the criminal class the Democrats find so important for the bolstering of their voter rolls - other than the dead - no matter how hi-falutin' they are, how well turned out, how big their wad of "show" money, regardless of the large dimensions of their "Texas" bankroll, or how shrilly they defend their legacy on Fox News.

Bill Clinton is a self admitted liar who took a dive for perjury, giving up his law license along the way, for a specified period of time, as a result of the fabrications and falsehoods he attested to under oath.

And it is because Mr. Clinton is first and foremost a convict that he will cause the most harm to his wife as she pursues her reckless headlong attempt to build a dynasty from the smoking ruins of the Clinton legacy.

Ruins, where that other notorious Clinton rotter, a man noted for conduct nearly as outrageous as Mr. Clinton's, Mr. Sandy Berger wanders the blasted landscape waiting for full rehabilitation from Hillary.

As we can clearly recall, Sandy Berger took his cheesy misdemeanor dive for stealing classified documents directly relating to Mr. Clinton's response to terror, therefore on Bill's legacy, and on the basis for ABC's "Path to 9/11," which Mr. Berger later opined poorly over, to ABC's extreme discomfiture.

Alas, Bill may yet wander the White House again as a former felon, while Sandy Berger could serve again, if he is confirmed by the senate, as a self-admitted thief of secret documents, which he secreted out in his undergarments -- and isn't it all just grand."

[Weaseldog]

When Clinton was in office, going after Monica Lewinsky and that whole scandal completely consumed the Republicans because for them, Clinton was a bigger threat than Usuma Bin Who?

Tying up the White House for years over this scandal was certainly more exciting for both parties than National Security was.

Besides the Taliban, with the help of the Republican Party was negotiating rights for a pipeline through Afghanistan in meetings here in Texas. Ultimately a proper prices for raping the Afghanistans couldn't be reached, so Bush was forced to take the business solution commonly used when a third world nation asks for too much money. He had the American public pay for a war to keep corporate costs down.

Had Clinton gotten UBL, Bush would've still found an excuse for war.

[Weaseldog]

So where did that 3% decline figure come from?

I saw somewhere a guess being made that this could happen. But nothing from an inside source.

It's very difficult to know the current state of of oil production. There's a time lag from the oil industry reporting their production and the time it takes to put the reports together.

When the reports are positive, the US Gov publishes them quickly. But as we was from 2000-2003, the US Gov will drag it's feet when the news is bad. We waited more than two years then, for data that's usally released to the public in six months.

If we do have a downturn this year, then the EIA may just delay publishing the stats, and then we'd still not know...

[corrientempe]

"If, however, America could find some way to harness the energy in the smoke it blows up its own ass every day, we would never face an energy crisis."

Isn't that the sick truth?! Thanks again for telling it like it is, Jim!

[Mark]

OEO,

Thanks for publishing that inane drivel from John Burtis. It's always good to see an occasional example of neocon rhetoric.

The neocon's argument is largely based on attacking the character of his object of prey, most often a member of the Clinton household.

The neocon does not have facts at his disposal, nor any logical basis for his vitreole, and yet this does not deter him in the least.

Neocon rabidity is produced by two things alone: loudly proclaimed faith in a God that is the antithesis of the neocon and an all-consuming passionate love for money and power. It may seem that those two interests are at odds, but neocons thrive on non sequiturs and are frightened and outraged by common sense, decency and truth.

Every now and again, make it a matter of patriotic duty to turn over a rock, shine a flashlight down a sewer, or watch Fox news to determine that latest spew of the neocon.

[kd]

Neo-con dupe, OEO, takes a moment to toss in something about Clinton. The significance?

*

Thanks, Anon, for the revealing post about war-profiteer Cheney & Halliburton.