Hedge funds are gambling, while production is crashing. The real estate bubble is over, and going down. New York City is beautiful, that's why I take pictures of it, but it's the belly of the beast.

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Real Crash - July 2008

Short Selling and Oil Speculation

July 24th 2008 20:09

Real Crash- Looking at Capitalism and its Laws:

It is interesting that the limits on financial naked short selling of 19-top financial companies, Fannie, Freddie, Chase, etc, hits at the same time as the oil price is going down-- for now. A hint is the collapse in the same last couple of weeks of Sem Group, which went bankrupt. Sem Group is a physical oil trader that could not find the collateral anymore to finance huge bets on selling oil short and long.

This reminds us that the average jog or even average millionaire is not the one even capable of playing with huge bets on paper oil. It is the largest firms. If the physical oil people, in terms of deliveries start to go broke, this, not a collapse in demand, could bring the price of oil down further.

The game still is to bring the price of oil up. So the real question is, will the US government regulations on short selling of financials (no naked) be spread to oil. Once there has to be 50-percent dollar put up of cash or stock to back up oil futures, the game is over. Time for a nice bankruptcy reorganization... Did anyone see the show by the geezer at Larouchepac?

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Comment by S.L.

July 24th 2008 20:14

The Political Brief

You know more about international finances than I do, Howard. I do want to ask you an unrelated question, though. What do you think about the new minimum wage increase? Do you think it'll help or harm the economy?

Comment by Howard

July 24th 2008 20:34

Real Crash

I seriously doubt that a few dollars to the poorest people will hurt the economy, and also they can buy a few more things. The rot is at the top.

Comment by S.L.

July 24th 2008 20:41

The Political Brief

But it won't really help anyone, Howard. All it does is drag the economy down by raising prices on goods and services beyond what the minimum wage earners can afford. I would have thought you'd have an opinion....

Comment by Howard

July 24th 2008 21:20

Real Crash

In a sense what you say is true, but we don't want the cult of cheapness. I need to write a post on the need for a protectionist economy again, it's A. Hamiliton, H. Carey Abe Lincoln and FDR all over again. We need high tariffs, production, new infrastructure, to produce real goods not huge amounts of "financial services."

Comment by S.L.

July 24th 2008 21:36

The Political Brief

I agree that governmental "financial services" are not what we need right now. We need to drill, get nuclear plants up and running, stop raising the minimum wage before it breaks a few thousand more small businesses, and not drain the reserve for nothing. When the "infrastructure" was paid for by government money, how much of it actually got done, Howard? The money was appropriated for the New Orleans levies, but never used. The bridge that failed and killed so many (in Wisconsin) was scheduled to be checked but hadn't been yet. The money for it went to a bike trail or something, didn't it? If we're going to work on "infrastructure" we should certainly demand that every cent allocated goes exactly where it is intended, shouldn't we?

Comment by benny22

July 27th 2008 04:33

So, why don't we all work for 10 cents an hour -- that should get things booming...

Comment by S.L.

July 27th 2008 04:46

The Political Brief

If all the other prices came down equally, we could all work for ten cents an hour and do well. I don't think it's likely to happen, but you never know. People would have been glad to get ten cents an hour during the Depression!

Comment by benny22

July 27th 2008 05:13

Then do we agree that it would be a good thing for wages to increase faster than prices? That would seem to be a moral perspective, although there are those who believe a widespread, prosperous middle class is undesirable because it is hard to control.

Comment by S.L.

July 27th 2008 15:04

The Political Brief

Benny22, the wages cannot rise faster than the cost of living. Oh, maybe on paper, briefly. But when the wages go up, employers have to charge more for the goods and services to stay in business or lay employees off. So the extra dollar an hour on your paycheck will cost you a dollar an hour or more in higher prices. Raising the minimum wage only really helps the politicians who bring it about because some voters actually believe it helps them. No historical perspective and not understanding finance or markets will do that. It's one of the reasons we have so many entrenched politicians, they keep doing things that "seem" like a good idea at the time, and when it doesn't work, they blame the "greedy" business people who just want to stay in business.

Comment by benny22

July 27th 2008 15:51

S.L.... If wages cannot rise faster than prices, then how can there be Progress?

Comment by S.L.

July 27th 2008 15:59

The Political Brief

Progress, Benny22, comes about when the economy is moving along at a healthy pace and people (and businesses) are prospering. The wages used to go up with the general cost of living, gradually, rather than being artificially boosted by politicians who were only after votes. Every time the minimum wage increases a percenatge of the workforce gets laid off, a few new businesses fail, a few more small businesses fail and it takes time for the economy to start to rebuild again. Lately, that's when the next "raise" in the minimum wage comes about. It isn't the only reason for the slowing economy, but it is a good part of it.

Comment by benny22

July 28th 2008 01:37

S.L. What seems to bother you the most is that businesses pay for the increased wages, which increases the cost of production on which prices -- to your way of thinking -- are based. So, how 'bout we increase purchasing power without increasing cost of production? If there was a way to do it, would you think that was a good idea.

Comment by S.L.

July 28th 2008 16:09

The Political Brief

As good as it sounds, benny22, it isn't likely to ever happen. Economies aren't built on anything but supply and demand. If the supply is big and the demand is small, things go one way, and the opposit is also true. If I want to buy groceries cheap, I go to a store where they have fewer employees to pay and can sell the merchandise for less. Or WalMart where the employees don't become millionaires overnight on their wages, because the prices are low (also due to where the products come from). If you have ever owned a business, you should understand how the employee wages effect the cost of operating your business and the prices you have to charge in order to remain in business. The prices are reflected by the minimum wage these days, not the other way around.

Comment by benny22

July 28th 2008 20:58

Actually, I have run businesses and I was successful because I was always looking for ways to increase the purchasing power of my employees while reducing my cost of production. So, I know its a good thing and, as such, should be a goal of economics.

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