The oil price bubble – and its aftermath

Francisco Blanch, the Merrill Lynch & Co. analyst who called the $147.27 record crude-oil price nearly on the nose, sent markets into a tailspin with his forecast that the next move may be back to $25 a barrel in 2009. Such relief for consumers may be short-lived once the global recession ends, he said.

“If we reignite economic growth to a very fast level, we will have a shortage of energy again,” said the 35-year-old head of global commodity research at Merrill Lynch in London. Oil may rise to $150 in two or three years, said Blanch. World growth will reach 2.2 percent next year and rise to 4.8 percent by 2011, according to the International Monetary Fund. (via Bloomberg.com: Exclusive).

What’s being trotted out …

it was largely due to the surging middle class in India and China

Cant be true. India and China are still too small and consume too little of oil., still. India produces 30% of its own oil – and another 50% is tied up with long term supplies. The last 20% of this is tied to spot markets – which is where the oil prices yo-yoed.

it was price fixing by the oil companies

For how much and how long … They no longer have the power or the reach to do that – the way they did earlier. Oil production, supplies and trading is now controlled by State Oil companies of OPEC, Russia, Norway and para-State Oil companies like BP. For them to do this for such a long time was not possible

others said the Enron loophole was largely to blame for high oil prices

How much difference can regulators make … ‘Irrational exuberance’ did result in a few contracts – but they would have vaporised in a jiffy, with the coming of settlements.

Further I would draw attention that all these theories came from the Governments (US, Saudi, etc.) themselves – which immediately disqualifies them (in my mind).

I would draw attention to the following dots – which may paint another picture altogether.

1. The biggest shareholder of Citibank is a Saudi prince (HRH Prince Al-Waleed bin Talal bin Abdul Aziz Al Saud (Arabic: الوليد بن طلال بن عبد العزيز آل سعود‎).
2. The housing and mortgage boom ran concurrently with the boom in oil prices.
3. Most of the petro dollars were invested back in the US funds
4. Many private funds (like Blackstone, Cerberus, etc.) came up on the back of this liquidity.
5. The Chinese appetite for dollar Treasuries and debt.

This spike in oil prices was designed by the US and OPEC to ‘suck out’ the excess ‘dollar liquidity’ from the world currency markets – to sustain high dollar exchange rates, to sustain the dollar hegemony. Since very few people were involved, the operation continued.

If you notice, every few months, there would be a supply disruption – like a fire on a rig, a boat would crash into a rig, a pipeline would undergo maintenance, etc. Not to forget the Iraq War, the Afghan War, the 9/11, etc.

All this was done to prolong the spike. As this situation, ground into an impossibly high bubble, it crashed. Likely architects – Citibank, Alan Greenspan, Ben Bernanke, OPEC, and of course, our favorite, George W Bush.

Rothschilds Move To Bankrupt European Farmers « Aftermath News

Even with the transportation and duty costs, the Indian fruit and vegetables are likely to bankrupt the European and Japanese farmers. In Europe, most of these farmers are heavily indebted as the EU paranoid sanitary norms as well as the packaging requirements of the supermarkets have forced them to invest in expensive machinery and infrastructures.

When the Indian fruits and vegetables arrive in Europe, most of these indebted farmer families will have to say goodby to their farms which will be confiscated by the banks. Many of the still remaining independent European farmers are producing fruit and vegetables since the independent livestock and wheat farmers have already been decimated by the “market economy” making profitable only the giant exploitations in these sectors. (via Rothschilds Move To Bankrupt European Farmers « Aftermath News).

How much paranoid can the Europeans get?

When it suits them they can talk, from one side of their mouth, about free market – and at other times they get suspicious about small farmers from India.

An interesting situation exists in the food sector – especially in the US. Giant food corporations, killed buying competition with high prices (to farmers), direct buying from farmers (at higher prices), monoclonal seeds that destroy bio-diversity. And the US consumers are not getting the lower food prices that are being promised in India.

Farmers became dependent on corporate supplies of seeds (at high prices) and corporate purchases by the same corporations (at low prices). Today, an ‘efficient’ and ‘hi-tech’ agricultural farm sector in the US needs more than US$ 7.5 billion (conservative estimates, assuredly) of subsidies to survive. The US-EPA says, “By 1997, a mere 46,000 of the two million farms in this country (America), accounted for 50% of sales of agricultural products (USDA, 1997 Census of Agriculture data)” – and gobble up most of this huge subsidy that lowers Third World agricultural prices. These lower agricultural prices devastate agriculture in Third World countries, creating man-made famines. These man-made famines, of course, gives the West a false sense of superiority. (bold letters mine).

The Indian agricultural system, with nil subsidies, working with cost disadvantages, does not have giant buying corporations and monoclonal seed stock, is holding its own against subsidized agricultural systems of the West. And paid hacks of these Western corporations are trying to tell Indian consumers and policy makers that these giant corporations will reduce the costs of food In India.

These giant corporations are aiming for entry into India – promising ‘efficiencies’ in buying (which will give consumers a better price), and higher prices for farmers (which will increase farm incomes). Of course, this will last as long as there is competition. Once, these giant corporations, fueled by huge amounts of debt and equity, drive out competition, they will lower the boom on the consumers and the farmer – like in the USA.

Raj Patel, in his book, Stuffed and Starved, demonstrates how global food corporations are behind global food habits, imbalance traditional diets, creating disease epidemics (like diabetes) – and how India needs to be careful before crafting industrial policies that encourage these global corporations to destroy Indian agriculture. A book review extracts some key points as follows,

What we think are our choices, says Patel, are really the choices of giant food production companies. Millions of farmers grow food, six billion people consume it. But in between them are a handful of corporations creating what Patel calls “an hourglass” model of food distribution. One Unilever controls more than 90% of the tea market. Six companies control 70% of the wheat trade. Meanwhile, farmers across the world are pitted against each other, trying to sell these gatekeeper companies their produce. And if you think the consumer comes out on top because of all this competition, think again.

Rothschilds to use Indian farmers to supply EU with fruits and vegetables – Portfolio.com

West manages a food surplus after spending close to US$ 100 billion in subsidies to their farmers. Can Western farmers compete with India and Africa without subsidies?

China has 60 percent of the arable land of India, but it’s 40 percent more productive because of technology. That India is the largest producer of fruits, No. 1 in the world, No. 2 in vegetables, and has only 1 percent of the export market. So, those are all really big factors that we know how to fix. You fix them with technology on the ground, with cold storage and infrastructure on the ground. And if the retail sector isn’t ready to buy higher-quality fruit and vegetables, which I always thought they would be-but three years ago, it was less obvious than now-you could export them and be the lowest-cost exporter. (via An interview with Lady de Rothschild – Executives Column – Lloyd Grove – World According to … – Portfolio.com).

Most interesting

The ‘backward’ Indian farmer working without subsidies, with low technology, lower productivity has a cost edge over his European an American counterparts.

Between the US and the EU, Western farmers get a subsidy of US$100 billion – and yet they cannot compete with Indian farmers.

Agriculture is the future.

Tally-ho!

Related articles

• Why India Should Stop Fearing Wal-Mart (globalspin.blogs.time.com)
• EU to use drones for policing farmers (quicktake.wordpress.com)
• Protest over EU-India free trade deal – The Guardian (guardian.co.uk)
• Meet The Remaining Heirs Of The Legendary Rothschild Dynasty (businessinsider.com)

Italy will fingerprint children | Human Rights Tribune – www.humanrights-geneva.info

According to Italian human rights organisation Opera Nomadi, approximately 160,000 Roma currently live in Italy. Most of them inhabit improvised camps on the outskirts of towns. Roughly 60,000 come from Romania, which has Europe’s largest Roma community, numbering close to 2.5 million in a population of 22 million.

The Roma are believed to have migrated to Europe from India since the 14th century.

Following several highly publicised reports of Roma, often from Romania, committing crimes in Italy, the Italian centre-right government declared a one-year state of emergency May 21 in relation to the settlements of nomad communities in the regions of Campania (capital Naples), Lombardia (Milan) and Lazio (Rome).

Ordinances accompanying the state of emergency allow the prefects of these regions to conduct identity screenings, involving fingerprinting, of all persons, even those not considered dangerous or suspected of crimes. Authorities in Naples and Milan have since declared their intention to fingerprint nomads, including minors, living in camps around the cities. (via Looking to Rome to escape the Roma | Human Rights Tribune – www.humanrights-geneva.info).

Why does Europe continue to demonize and persecute the Roma

Despite the immense contribution by the Roma Gypsies to European culture and life. Is it because: -

1. They have a different lifestyle – which is migratory and frugal. They do not wish to have permanent homes, too many possessions or jobs. They prefer living in wagons, with skills and trade that they possess.

2. They have not ‘integrated’ into the White, Christian, European social system. They wish to remain ‘different’.

3. They stick out like sore thumbs – in a Europe where the Jews have been annihilated, where  descendants of the African slave populations have been exterminated and the Islamic population (past and present) is not tolerated. In such a situation, the Roma Gypsies have not only survived, but have regrown (after Hitler’s concentration camps killed them by millions).

Since when, are these qualities a crime.

The poor will pay for the Chrysler bailout – NYTimes.com

Last year, Cerberus and about 100 co-investors bought 80.1 percent of Chrysler for $7.4 billion from the German carmaker Daimler. It also bought a controlling stake in GMAC, the finance arm of General Motors. Since then Chrysler has eliminated more than 30,000 jobs and struggled to keep itself afloat while its sales have plummeted. Cerberus is pressing to have Chrysler merge with G.M., but G.M. has said a tie-up is off the table. Chrysler is asking the government for $7 billion to get through the next few months.

Cerberus, named after the mythical three-headed dog that guards the gates of Hades, has a fierce reputation on Wall Street. Many bankers and investors are reluctant to talk openly about the company, which is renowned, even feared, for its hard-nosed deal-making.

But Cerberus is also pursuing its interests aggressively in Washington, where some lawmakers have questioned why the government should assist the privately owned Chrysler. In addition to Mr. Snow, the firm’s chairman, Cerberus’s Washington hands include Dan Quayle, the former vice president, and Billy J. Cooper, who has worked as partner at the lobbying firm Patton Boggs. (via Chrysler’s Friends in High Places – NYTimes.com).

This scandal is one big whopper – but for the next 15 minutes. Like, Andy Warhol said 40 years ago, in future everyone (yes even you) will get 15 minutes of fame. So, it is with this scandal.

Who will pay for this bailout is the important question. The NY Times, of course, does a good job in covering this up – and showing that the US will pay for the bailout of US Corporations. The American tax payer in the meantime moans as though he is paying this bill.

The truth?

The US Government, funded by the BRICS nations will use its printing presses to fund Chrysler – the bill for which, of course, will be seen by the poorest of the world – through the Bretton Woods mechanism.

When will we junk the dollar and the Euro?

Indian company (MCX) launches its 10th electronic exchange – in Africa

Africa will have better than the outdated open outcry trading in US

India’s largest commodity bourse the Multi Commodity Exchange (MCX) is spreading its wings to Africa. It has set up a wholly owned subsidiary–MCX Africa–to take the futures trading in commodities to 53 African countries.

Last week, MCX founder Jignesh Shah and his team were in Botswana to launch a licence for MCX Africa to be domiciled under the Botswana International Financial Services Centre (IFSC) in Gaborone .

Executive Director of MCX Africa Chris Goromonzi said time has arrived for Africa to determine its own destiny, saying there is no reason why agriculture and resource prices should be determined outside the continent.

Officials said MCX Africa envisages a level playing field for African stakeholders in global commodity markets, saying they are bringing to the continent modern financial instruments only seen in other regions of the world. (via MCX spreads global wings; sets up MCX Africa).

Earlier,The Hindu Businessline reported that

FTIL-MCX previously promoted Dubai Gold and Commodity Exchange (DGCX) in joint venture with Dubai Metals and Commodities Centre. DGCX, which began trading on bullion in November 22, 2005, had already spread its portfolio to currency (Euro, Pound and Yen) and is now planning to enter the energy segment with contracts on fuel oil (used in ships) and gasoline. It has also planned the launch of contracts on steel.

It is these kinds of exchanges and trading platforms which India has now become an expert in. FTIL is leading this Indian charge into the international arena – this being the 10th exchange FTIL is associated with.

The West is obviously worried that they could soon lose their dominant status in terms of setting commercial terms of trade. That power may soon pass on to the producers.

Couple that with the coming end of dollar hegemony, the doubtful start of the Euro, and what we have is a situation, ideal for the developing world to launch a third global reserve currency, which will benefit every country – without any one country being an undue beneficiary.

IPS man suggests that IAS should be replaced -The Times of India

Many feel that the duties of a home secretary, especially those related to internal security, would be better discharged by an officer from the IPS, who would be professionally better qualified because of greater exposure and experience in the field of law enforcement. Chances of enforcing the rule of law would be better, and therefore people’s faith in democracy would be firmer.

It may sound radical, and pretty unpalatable for our administrators, but isn’t it high time that the country thinks in terms of having the right and the best person for every position, the one most qualified and with the right kind of experience? This includes choosing the best candidate as home secretary who is responsible for the internal security of the country, be it at the Centre or state level. (via Cops to the rescue-Subverse-Opinion-The Times of India).

By extending this logic, Army Generals should be our defence ministers and bankers or businessmen our finance ministers. Valid points but bad logic.

Indian police manages with the lowest population-to-police ratio – and the lowest prisoner population. These two qualify the Indian police for  more recognition – and less fault finding.

That the IAS is a calcified, ossified cadre with high corruption levels – and a bent of thinking that has not served India well, Mr.Periera should, fairly, be your target. India needs bureaucratic reform – and not loyalty to your own  IPS cadre. That is the hallmark of the IAS cadre, that you are, in fact, criticizing.

Bankrupt ideas on Restructuring Indian education system – The Economic Times

Despite big increases in the education budget (the Eleventh Five-Year Plan has been called an Education Plan), government just does not have resources to fund expansion of the system rapidly enough to meet the growing demand, given other competing resource requirements. Even within the education sector, priority will be given — quite rightly — to primary and secondary education. Dependence on government funds will, therefore, exacerbate the quantitative mismatch between supply and demand for higher education.(via Restructuring the education system- Opinion-The Economic Times).

Kiran Karnik a well known Indian ‘intellectual’, writes this long article on the education sector. His entire focus on how to mold Indian education system on Western lines, misses a few points completely.

80% of India’s population is excluded from higher education as Indian higher system is predominantly in English. Hence, this puts a premium on English – and discounts Indian languages in the educational sweepstakes. The negative effect this on Indian self esteem is not even a point of discussion here.

The principle of exclusion (a colonial idea) is a dominant marker of the entire Indian education system – rather than inclusion. British (and before that Islamic rulers’) colonial practices supported foreign languages on the backs of the Indian taxpayers’ contribution – and actively worked on destruction of local cultures.

For instance, in the erstwhile State Of Hyderabad (equal to about 10%-12% of modern India), ruled by the Nizam, a large non-British kingdom, 2000 year old local languages like Telugu and Marathi were considered uncouth and barbaric languages – compared to a 700 year old language like Urdu, which was supported by the State. Thus anyone without the knowledge of Urdu was excluded from the system. So it is now in India, with English.

This restricts 80% of India’s population from contribution and access to opportunity. Without looking at it from an ethical point, but purely as an economic question means we should look at the cost of this policy.

How does this hinder India? India loses every year about 200,000 highly educated people to the West. These 200,000 people have been educated at subsidized Indian Universities at a considerable cost to the poor Indian taxpayer. What return does the tax payer get from this? Negative returns.

What happens when English stops being an important language in the global sphere? What use will India’s investment in English be at that time? And this will happen sooner than we imagine – at a greater cost than we believe.

What is the cost of switching from English?

Assuming that a 100,000 essential books need to translated into local languages, at a cost of say Rs.100,000 per book, it still amounts to Rs.1000 crores. Is that a large sum of money for modern India. Hardly.

What is the loss to India? How much does this reduce India’s growth rate by? Hard numbers – but defintely big numbers.

So why is India persisting with this policy. Because all the high and mighty, finally want their children to ‘escape to the West’, with a good education from India – at the cost of India’s poor. This vested interest makes this policy go around.

And a lot of propaganda.

Rupee shoots up against US dollar- Forex-Markets-The Economic Times

In tandem with the upswing in equity markets, the rupee, after Monday’s brief pause, on Wednesday shot up by 60 paise to end at a nearly 4-week high of 48.98/49.00 against the dollar on expectations of more capital inflows.

In fairly active trade at the Interbank Foreign Exchange (Forex) market, the local unit opened sharply higher at 49.18/20 a dollar from the previous close of 49.58/59. (via Rupee shoots up by 60 paise vs US dollar- Forex-Markets-The Economic Times).

In the middle of the 26/11 terror in Mumbai, the increase in India’s foreign exchange reserves got missed out. This may be an early sign of the dollar crash. For the last 6 weeks the dollar has been unusually strong – due to demand for dollars to meet redemption pressures in the US.

That redemption pressure are receding – and the reality is where will the dollars go? Stagnating Europe, geriatric Japan, despotic Middle East. The choice is BRICS (BRIC + South Africa). And amongst the BRICS, India is particularly attractive as a destination.

First sign of dollar reversal?

I believe ya Zardari

The entire 26/11 terror incident has taken away the focus from the global currency crisis. This benefits only the US and the Europe.

This also takes away another 6 months – and then the election. By the time this gets on the Indian radar screen, it is another 1 year now. I wonder who was REALLY behind this 26/11 incident.

Zardari – I am willing to believe, ya!

Robert D. Kaplan gives gyaan on India in NYTimes.com

It was apparent to all (including one British cartoonist) that Jinnah was staging objections under false 'allusions'! (Artist - David Low (1891-1963) Published - Evening Standard, 04 Sep 1946).

Hindu-Muslim relations have historically been tense. Remember that the 1947 partition of the subcontinent uprooted at least 15 million people and led to the violent deaths of around half a million. Given this record, the relatively peaceful relations between the majority Hindus and India’s 150 million Muslims has been testimony to India’s successful experiment in democracy. Democracy has so far kept the lid on an ethnic and religious divide that, while its roots run centuries back, has in recent years essentially become a reinvented modern hostility. (via Op-Ed Contributor – Trouble in the Other Middle East – NYTimes.com).

Wishful thinking or ignorance Mr.Kaplan

Actually neither. It is propaganda.

The West has the lowest levels of religious diversity – and the way they have dealt with it is simple – genocide. Native Americans in Canada, USA, Native Aborigines in Australia are excellent examples.

India however, is exactly – and unfortunately, the only country of its kind. No country offers the religious freedom that Muslims have in India – including Muslim countries. Christians cannot proselytize with as much freedom (and arrogance) in any other country as in India.

That is inconvenient truth (for the West) Mr.Kaplan.

History of Hindu Muslim Feud …?

For starters, you must consider how the Muslims fought for the overthrow of British colonialism from 1857 War to 1947. The Deoband Seminary, Sheikh Abdullah were all popular Muslim leaders – who did not wish for or support the formation of Pakistan. The State of Pakistan was an artificial creation – and Sheikh Abdullah refused to even meet up with Jinnah - and who was deemed irrelevant.

The Deoband seminary issued a call to Muslims, against the idea of Pakistan – and now Deoband is again renewing its campaign, with its anti-terror agenda. Deoband seminary was set up after the 1857 War, as a religious institution to ‘escape’ British repression. 75 years after its establishment, the Deoband school became famous during Independence, due to its strong anti-Jinnah, anti-Partition stand. And 60 years after Indian independence, the Deoband seminary is again, leading an anti-terror campaign in India.

As for the India-Pakistan Partition riots, you must remember, that worst of these riots happened in British ruled areas. The feudal Nawabs of India, the ‘oriental despots’ as you probably know and call them, were able to avert these riots. How come?

Mr.Kaplan, it was a lot like ‘abdication of authority’ by the British colonial Government – if not active connivance! In history, it is called scorched earth tactics, usually used by retreating armies and forces.

In this case, the British Raj.

How about this?

Indian Naval Ratings March For Indian Independence

Of course, the colonial narrative does not mention how the Naval Ratings declaration threatened an ignominious defeat to the Empire, as a fait accompli. Mr.Kaplan, you must check out how the Naval Ratings (both Hindus and the Muslims together) co-ordinated – and it were these Naval Ratings who raised the flag of Indian Independence.

Post WW2, a two million strong, Indian defence units, battle hardened and exposed to global war theaters, were a force that the British would not dare to take on.

Allama Iqbal (now the iconic figure in Pakistan) converted to the a very nascent two-nation theory after his stint in England – circa 1909. Poets like Sahir Ludhianvi moved from Pakistan to India. MJ Akbar’s family was another that moved from Bangladesh (then part of Pakistan) to India.

Like the colonial detritus in many ex-colonies, the two-nation theory was a British creation.

And remains a colonial legacy.

As for now …

The root of the problem is the US intervention – and you are calling for more of it. My advice, Mr.Kaplan  – simple and will not the cost the US anything.

Lay off.