On Nov 12, 2009, at 7:43 PM, Bryan Atinsky wrote:
> http://seekingalpha.com/article/172797-the-global-oil-scam-50-times-bigger-than-madoff?source=email
>
> $2.5 Trillion - That’s the size of the global oil scam. It’s a
> number so large that, to put it in perspective, we will now begin
> measuring the damage done to the global economy in "Madoff
> Units" ($50Bn rip-offs). That’s right - $2.5Tn is 50 TIMES the
> amount of money that Bernie Madoff scammed from investors in his
> lifetime, yet it is also LESS than the MONTHLY EXCESS price the
> global population is being manipulated into paying for a barrel of
> oil.
There's a lot to this. There was a speculative bubble in commodities driven by index buyers in the final days of the expansion that burst in August 2008.
Ken Hanly:
> One critic claimed that the processes involved simply involve some
> speculators losing and some winning because of the fact that no real
> goods actually change hands. However this seems to miss the point
> that the price is artificially raised so that people are paying much
> more than they would for the real goods or at least that would be my
> understanding.
The problem with these index funds is that they usually herd and bet in one direction. So we saw an economically pointless rise in the price of oil followed by a sharp decline - and now it's back up again. While a recession-induced decline in demand would suggest a lower price, the gyrations were tremendously exaggerated - a classic case of Shiller-style excess volatility.