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03/18/2012

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T E Cho

Dave,

One thing that I'm not clear on is why there aren't losses equal to the gains, afterwards. Driving up the prices should result in eventual oversupply, and then a collapse of prices. The collapse should result in losses.

The only thing that could explain it is some artificial price support to keep it from going too low, below a certain point. Maybe crop price supports are keeping it from going too low, making it a low risk to bid up prices, but there are no oil price supports... Maybe oil is just riskier. Or maybe there is an exploitation on the non-linearity of demand. If youre starving a loaf of bread is worth $1000, but if youre not and theres an oversupply, it gets sold for animal feed at $.10 for two loaves making an avearge of $500 per loaf over time, a inflation result on average.

So the question becomes, what prevented this from happening as much in the past, changes in the laws somewhere?

Ben

I think we're moving toward war. The more the markets are disrupted, the more the physical world is impacted. Food production, water resources, mineral resources, rare earth metals and the like are then more and more recognized as having "True Value".

The question then becomes one of inventory: Where are the raw materials? How will our factories get the raw materials? How can we put a trade route there? How can we project power into that region? How can we start a war there?

We've seen this pattern over and over all throughout human history. What makes our current situation exponentially more dangerous are the demographics and technology at our disposal. Could you imagine the outcome of World War 2 had it been fought with the weapons available to our military today? That's the scale of conflict that we may be heading toward.


T E Cho

I see now, financial industry led deregulation efforts.

gregh

You can trust the markets. If speculators are wrong they lose money. And as someone stated above high prices should bring more supply. If there is supply to bring. Oil, not so much. And when Israel attacks Iran do you expect the price of oil to stay level?
The markets usually are right in the long run.
Nat. Gas is oversupplied and the price is low. Is it too low? I bet there are alot of speculative shorts driving down the price! Are the shorts bad in that case?
In short, if speculators are proved wrong by the market they lose. If they are long and they lose they push the price lower than it might of went. And visa-versa.
I take high prices as a warning. I do not subscribe to conspiracy theorys regarding markets. There is too much money at stake for the participants to co-operate. Speculators trade against one another.
If I buy physical oil I can store it essentially forever if I want to pay the cost. And then sell it. If I make a paper bet I can keep rolling it over as well but my broker is going to ask for a pile of cash when the price starts to go against me! That prompts me to cut my loss! Speculators compete with other speculators....Truth.
gh

Leaving Hope

Ben's correct. There's no way out of thermonuclear war over resources. There are plenty of novels and movies that know via their sharp analysis through art. Plenty of fact filled academic volumes agree. Pack your rice, dig your shelter, wait for the singularity, for it is near. Thus the culture of death finds its solace, and perhaps life and evolution can have another chance, with or without the self-domesticated great ape, the hubristic god who found nemesis.

Trent has never played the following song in concert; it's that good.

Leaving Hope
http://www.youtube.com/watch?v=dLzcfdQZLdI

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