Category Archives: Commodities

Satyajit Das: Top Secret – The Chinese Envoy’s Briefing Paper On The Australian Economic Outlook (Part II)

By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – Revised Edition (2006 and 2010)

Your Excellency, I am pleased to present the requested report on the economic outlook for the Great Southern Province of China, currently referred to by the local population as “Australia”. For convenience I will refer to the country by this older name. We will now turn to the outlook.

Satyajit Das: Top Secret – The Chinese Envoy’s Briefing Paper On Australia’s Economy (Part I)

By Satyajit Das, derivatives expert and the author of Extreme Money: The Masters of the Universe and the Cult of Risk Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives – Revised Edition (2006 and 2010)

Your Excellency, I am pleased to present the requested report on the economic outlook for the Great Southern Province of China, currently referred to by the local population as “Australia”. For convenience I will refer to the country by this older name.

More Evidence that JP Morgan Stuck the Knife in MF Global

The death of MF Global and JP Morgan’s role in its demise is starting to look like a beauty contest between Cinderalla’s ugly sisters. As much as most market savvy observers are convinced that there is no explanation for how MF Global made $1.2 billion in customer funds go poof that could exculpate the firm, JP Morgan’s conduct isn’t looking too pretty either.

Chris Cook: Naked Oil

By Chris Cook, former compliance and market supervision director of the International Petroleum Exchange

All is not as it appears in the global oil markets, which in my view have become entirely dysfunctional and no longer fit for its purpose. I believe that the market price is about to collapse as it did in 2008 and that this will mark the end of an era in which the market has been run by and on behalf of trading and financial intermediaries.

Mark Ames: Failing Up With Joshua Foust – Meet The “Evil Genius” Massacre-Denier Who Shills For War Profiteers

Yves here. We cross posted a piece by Mark Ames on a massacre of Kazakh oil workers striking against KazMunaiGaz, a company “owned” by the son-in-law of the Kazakh president for life. Its American JV partners are led by Chevron.

The story got a surprising amount of pushback here and on Ames’ site, and some of reaction did not look organic. That led Ames to do further digging, and the resulting piece below gives a window into how big corporations go about neutralizing embarrassing news coverage. The more the public knows about the modus operandi of people like Foust, the faster they will be forced to seek more honorable lines of employment.

In this blogger’s humble opinion, this piece is a gold standard takedown of a truly deserving target.

Wilkerson on the Iraq “Exit”

This is a very useful, as in jaundiced, discussion by Lawrence Wilkerson on Real News Network, of the US effort to “end” its engagement in Iraq. Wilkerson covers the bigger strategic game, including the perspective of Big Oil, other major states in the Middle East, and China.

Corzine’s Know-Nothing MF Global Defense

Jon Corzine’s evasive testimony before the Senate Agriculture Committee was scripted so as to lay foundations for his defense against customer and possibly shareholder suits and reduce the already very low odds of an indictment.

Although I’ll touch on other interesting elements shortly, the key item from his presentation was one that the New York Times’ Dealbook noted:

Has China Just Hit Stall Speed?

The Financial Times reports that the Chinese sovereign wealth fund Huijin will buy shares in the four biggest banks in a move to goose the flagging stock market, which is at its lowest point since early 2009. This is the first time the fund has mad this sort of intervention since the onset of the crisis.

Randy Wray: The Biggest Bubble of All Time – Commodities Market Speculation

By L. Randall Wray, a Professor of Economics at the University of Missouri-Kansas City and Senior Scholar at the Levy Economics Institute of Bard College. Cross posted from EconoMonitor

Sorry, this is a day late (but hopefully not a dollar short).

Back in fall of 2008 I wrote a piece examining what was then the biggest bubble in human history: http://www.levyinstitute.org/pubs/ppb_96.pdf.

Say what? You thought that was tulip bulb mania? Or, maybe the NASDAQ hi-tech hysteria?

No, folks, those were child’s play. From 2004 to 2008 we experienced the biggest commodities bubble the world had ever seen. If you looked to the top 25 traded commodities, you found prices had doubled over the period. For the top 8, the price inflation was much more spectacular.

Irony Alert: If This is 72 Hours of Central Bankers Trying to Save the World, What Would Abject Capitulation Look Like? (Updated)

Reader Valissa pointed to an article at Bloomberg which looks like an effort at hagiography gone flat. Titled “Central Bankers Worldwide Race to Save Growth in 72 Hours of Policymaking,” it tries to perpetuate the myth of the overlords of the money system as all powerful, concerned with the public good, and competent. But as we know, they are increasingly politicized, hostage to ideology, unduly concerned with the pet wishes of banks, and tend to deny the existence of problems until they are acute.

Look at this impressive list of actions:

Asia Getting Hammered, Discouraging Report on ECB Commitment (Updated: Europe Opens Up, US Futures Rise; Second Update: Rally Fizzles)

Wellie, nothing like a lack of leadership to turn an ugly market day into an utter rout. But in another sense, the fake leadership in lieu of real leadership (as in taking a tough stand now and again and bringing the public around) is what set up conditions for a spectacular market unwind in the first place.

It’s one thing to do the equivalent of put the financial system on life support to deal with a crisis, quite another to leave the patient on life support and pretend you’ve returned to status quo ante.

The downdraft continues.

On Dangerous Disconnect Between Economics and Ecology

William Rees is one of the pioneers of ecological economics and is the originator and co-developer of ‘ecological footprint analysis’. This video contains some basic facts about current consumption levels in advanced economies that are attention-grabbing. I’d normally say “Enjoy” but this is not that sort of video.

Philip Pilkington: Economic Fetishism – Three Objects of Perverse Intellectual Pleasure

By Philip Pilkington, a journalist and writer based in Dublin, Ireland

Watch out, I have a large, very large fur, with which I could cover you up entirely, and I have a mind to catch you in it as in a net.
– Leopold von Sacher-Masoch

Many aspects of contemporary economic theory certainly seem to have their origins in the mythic and the moral rather than in the realm of the rational. But while this seems to be an accurate description of the system as a whole, it does not seem quite able to account for certain aspects of this system which appear to be rather obsessive in the minds of its adherents.

These obsessions, or ‘fetishes’, can be explained in like terms, that is: compared to certain primitive rituals and superstitions. To do so we will first have to form a better understanding of the fetish itself; an Enlightenment concept that has a long and interesting history.

The specific fetishes we will explore will be the most important today: the government, inflation and gold. All these phenomena are interconnected in neoclassical economic theory (yes, even gold, or at least the ghost thereof), however, they tend to lead their own individual existence outside of the Grand Neoclassical System itself. In and of themselves they are, for economists and economic commentators, fetishes that can be worshipped in dark rooms away from the great hall. They are like fragments of the main theory that adherents smuggle out of the temple and obsess over in their own private shrines.

Chinese Real Estate Bubble Finally Imploding?

The warnings of successful shorts like Jim Chanos, old Asia hands like Frank Verneroso, and economists like Victor Shih and Michael Pettis have failed to curb enthusiasm for the belief that the rise of China is inevitable and unstoppable. As someone who was deeply involved with Japan when it was seen as destined to replace the sclerotic US, I’ve learned to regard more or less straight line growth projections with considerable skepticism.

China has accomplished the impressive feat of bringing literally hundreds of millions out of poverty in a comparatively short time frame. It has also studied the Japanese playbook and managed to avoid some of its pitfalls (of course, it has the advantage of not being a military protectorate of the US), in particular refusing to liberalize its financial markets (some accounts of the Japanese bubble and burst give considerable weight to overly rapid deregulation and the growth of what was then called zaitech, or financial speculation). is also hostile to neoclassical economists.

China escaped much of the impact of the global financial crisis by ramping up investment even higher than its pre-crisis level. It now has investment approaching 50% of GDP, an unheard of level on a sustained basis. A big chunk of that is housing related (housing is an estimated 13.5% of GDP), and prices have long been considerably out of line with incomes, a telltale sign of a bubble. In Beijing, admittedly one of the hottest markets, an average priced new apartment was equal to 57 years of average worker savings (and if you tried to pay for it with a super-long dated mortgage, you’d be in hock even longer, since you would also need to cover the interest charges).

Another warning sign is inventory overhang; the Wall Street Journal reports tonight that Standard Chartered forecasts that level of unsold apartments in secondary cities will amounts to roughly 20 months of sales by year end (and that’s before considering that many of the apartments are being acquired as investments rather than for use).

The Journal story tonight provides evidence that the Chinese housing market is going into reverse