Monthly Archives: May 2012

Four Economic Mandates Examined: Oil Speculation

This is a continuation of Four Economic Mandates Examined:  Mortgage Modification.  This series focuces on four economic mandates proposed by Robert Reich.

Mr. Reich has recommended to the President, as his second of four mandates that he should

“…condemn oil speculators for keeping gas prices high – demanding that the oil companies allow the Commodity Futures Trading Corporation to set limits on such speculation and instructing the Justice Department to investigate and prosecute oil price manipulation.”

What the hell is a speculator and why are they keeping gas prices high?

An oil speculator is someone who purchases oil today at today’s prices, stores the oil in hopes that the future price of oil will be higher and then sells the oil at some future date in hopes of making a profit.  This is simplified but the principles are the same.  The speculator may pay someone else to store the oil or the speculator may buy a futures contract.  For more details on how speculation works, see “The Social Function of Futures Markets” and “The Social Function of Call and Put Options”. Read the rest of this entry »

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Posted by on May 16, 2012 in Uncategorized


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Four Economic Mandates Examined: Mortgage Modification

I caught a small portion of the Daily Show with Jon Stewart.  He had Robert Reich as a guest.  Robert Reich is the Chancellor’s Professor of Public Policy at the University of California at Berkeley and was the Secretary of Labor in the Clinton Administration.  On the Daily Show, Mr. Reich proclaims that “investments” need to be made in infrastructure (even creating an “infrastructure bank”), education, research and development in the sciences, and “job creation”.  And, says Mr. Reich, government is the only entity to do these things.

To set the baseline of discussion and skew the issue in the “big spending” camp’s favor, Mr. Reich calls Congressman Paul Ryan’s budget proposal “wildly regressive”.  In truth, the Ryan plan is moderate at best.  According to the Ryan Plan’s own numbers, the federal government will run a fiscal deficit until 2038.  So even taking the estimates at face value, the Ryan Plan will not actually balance the budget for almost 30 years.  I am not sure, exactly, what “wildly regressive” means at Berkeley, but if we are in a debt crisis and facing a second downgrade, does it seem like we have 30 years to get to a point when we can start PAYING off our debt – ever increasing for the next 30 years?  I do not have a degree from Berkeley, but “wildly regressive” seems misleading at best.  But hey, I am not the Chancellor’s Professor of Public Policy either. Read the rest of this entry »

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Posted by on May 10, 2012 in Uncategorized


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