Thursday, May 27, 2010

TOLD YOU SO - Oil and hurricanes, drilling defies moratorium

I thought I would just take a moment to reinforce two previous post one regarding hurricanes and oil and the other about drilling despite the moratorium. Nothing much can be added to either post, but in our busy disaster cycle things tend to get lost in the latest calamity. 

NPR reported that NOAA is predicted a busy hurricane season this year. The water in the Atlantic region that spawns hurricanes is 4 degrees hotter than normal. This will add energy to the normal cycle. The prediction is from 14 to 23 tropical storms with 8 to 14 of them reaching hurricane strength. The more storms we have the more likely one of them will interact with the gulf oil spill. Even if it does not pick up oil from the subsurface and oil rich hurricane is a brand new disaster for the record books. Even just normal storms can drive the surface slicks far into the wetlands and river inlets even if oil is not picked up as rain and carried inland.

Secondly, the New York Times has been doing a series of reports on the fact that MMS has continued granting drilling permits despite the alleged presidential moratorium. At the time I had reported that 15 permits had been granted and that number has continue to rise. After my post the agency even approved a permit in the arctic refuge. After a meeting with oil and MMS officials the participants set down to eat a cake decorated with “drill baby drill”. This sort of episode would be edited out of a cheap movie conspiracy thriller as too over the top to be believed.

Well, the American meltdown continues. BP treats the coast guard as their personal employees, defies EPA official and even advises them to contact the industry before issuing any further statements. It does not get more pathetic than this. This must be what Nigerians feel as the oil corporations exercise sovereign authority in there nations replete with a huge army of mercenaries to enforce their will. Also remember, while we are busy watching this disaster on TV, the other calamities are moving forward – debt, corporate lobbyist writing “reform” laws, failing infrastructure, global warming – the beat goes on.


NPR - Big Hurricane Season Expected

NYT - Big Drilling continues despite “moratorium”

Tuesday, May 25, 2010

Bank Reserves Are Phony

The United States has long required that banks keep 10 percent of their total assets in what we broadly call cash. This is usually fiat currency – i.e. paper money either physically at the bank or on reserve with the Federal Reserve. The purpose of this reserve is to guarantee the liquidity and safety of the banking system. Theoretically this will allow any bank to meet the demand to pay out liquidated deposits with cash. Sounds good enough I suppose, although 10 percent is not all that much,  But at least it is some safety margin right?

Wrong – in the mangled beanie baby swap meet which is the American economy most banks routinely meet their reserve requirements by borrowing money at the end of the day and then paying it back the next morning. In this manner, the Federal Reserve will consider that its reserve has been met and all is fine and dandy. They "rent" their security by the hour like hookers getting a room in a sleazy hotel.  Seems appropriate really.

In other words banks commonly do not actually have anywhere near 10 percent of assets in safe cash form. It is all another spun sugar fantasy like most of our finance system. If there was ever a serious run on the banks they would not be in any position to cover any the puny 10 percent reserve mandated by the Fed.

Oh and just to make you feel even better – the Fed waives reserves entirely for the really big money. Things like US corporate time deposits and all deposits made by foreign governments or overseas corporations. Additionally anything in a Eurocurrency deposit is also allowed to have zero reserve.

In other words in a serious financial panic our banks are no more secure than in the 1920s. This little update should take your mind off the destruction of the Gulf of Mexico and the abdication of national sovereignty to BP.  At least for a little while.

Monday, May 24, 2010

BP Defies EPA, Ursurps Coast Guard

Is our government totally under the control of big corporations? Is the power of money so great that the express rule of law is meaningless?  The EPA issues a cease and desist order to BP to stop using corexit – its chosen dispersant which test show to be marginally effective and highly toxic. BP chose to ignore that order. That is it – they say umm nope and the EPA whimpers away. No thunderbolt from the White House, no federal marshals ceasing control of the equipment, no fines – no nothing.

On May 20, the EPA issued an order to select a new dispersant from numerous approved formulas within 24 hours. BP declared that they were going to continue to use corexit which is banned in Europe also. Not only did they ignore the BP deadline, but they scolded the agency on daring to issue orders to BP at all. “Before the Coast Guard and EPA issue further directives a change in dispersant products or monitoring, we would like the opportunity to meet with you to discuss the option…”

Just the day before BP contractors ordered CBS reporters to stop recording film of the spill under threat of arrest. Two US Coast Guard officers were with the BP crew and told CBS “This is BP rules – not ours” Nothing I can say can expand upon this outrage. The day BP sets rules for the press is the death knell of what little access to truth the public has. Apparently, the entire US government is at the beck and call of BP as they handle this “incident” in the manner most conducive to BP interests. A local blog Is This Utopia? tried to contact the USGC regarding local volunteers making “hair booms” to help clean up the oil. When told she needed to talk to higher authority, the Coast Guard transferred her to a BP official.

I for one am done with this pathetic charade. Either the elected government rules this nation or it does not. If Washington is out of business please let me know and I will cease paying taxes. I gave Obama a chance to show otherwise, but he has proven to be as openly in the pocket of corporate interests that any President to date. Apparently corporate takeover of America is complete. This level of inaction is tantamount to abdication of the government to the moneyed elite.


EPA orders BP to change dispersant


CBS reporter threatened with arrest by BP

"Is This Utopia" Blogger told BP is running the USCG

Friday, May 21, 2010

Tax System Will Pass BP's Spill Cost To Taxpayers

In one of the earlier phases of the American meltdown, the IRS gave the big banks a special tax cut. They were given an exemption from tax law that will give them up to 20 years of tax deductions. BP may not get the sweet heart deal the IRS gave to the big banks because after all Secretary Geithner worked for Goldman Sachs, the company that funneled nearly a million dollars into the President’s campaign. But even without the perks of bought influence they can still write off the cost of cleaning up the disaster they created. Every penny they spend will be recorded as an extraordinary business expense and go to reduce their tax burdens. Ultimately, this means that the taxpayers will foot the bill for BP’s gross neglect.

As usual in America they claim that profit is due to the efforts of the capitalist class. It is deemed the product of their individual skill and is the sacred right of the rich. Expense on the other hand is the worker’s problem. Like risk it must be borne by the working class taxpayers. Whether that expense is the normal cost of business or the burden of cleaning up yet another disaster wrought by the stupidity, greed and hubris of the few – the cost is passed on to the many.

The result of this twisted logic is that 72 percent of corporations pay zero tax. Remember, this includes only corporations that paid zero $0.00 in taxes – if they paid a dime they were not included in this number. What percentage of corporations pay more than zero but far less than fair is not known. As you may have noticed, Government spending does not decline to meet this loss in revenue. It continues and most of it is spent on contracts with the very same corporations. For every dollar business evades paying, the working taxpayer has to make up for the taxes lost to the government. It is a brutally unfair system at its very core and minor tinkering here and there will not address its basic injustice.

Thursday, May 20, 2010

Oil and Hurricanes

Oil and water do not mix - I wonder how it will do with hurricanes.  Hurricane season is almost here and this could be the most interesting Summer ever.

Frantic over tar balls in the keys, dead pelicans in Pensacola? Don’t be. There are more interesting things to ponder. Here is a headline from the future: Hurricane Betsy coats east coast of Florida in Toxic black rain” Remember when the scientist were all repeating what they did not know about the oil spill? Well the one thing they did seem to know was that we were only interacting with less than 10 percent of the actual spill. No one of course was sure where the other 90 percent was going.

But it is a good as any bet that it is floating someone in the gulf below the visual level. Either scraping the bottom clean of life or floating suspended halfway below the surface in a great pool of semi dispersed, black death. Now, imagine along comes a hurricane churning up those waters and suspending them in its rain bands. Then said hurricane carrying billions of gallons of petro laden water scatters them all along the Florida coast and hundreds of mile inland. What fun we will have then.

The rain bands from a large hurricane can cover half the state and run its course inland for hundreds of miles. Oil and water do not mix so when the rains of the hurricane finally soak into the soil or run into the rivers and lakes we will have a nice even coat of oil all over – well everything. I would think even our Oil industry scientists can imagine the dimensions of that problem. Oil contamination of soil cannot be readily exposed to the “make them so small no one can see them” magic that passes for cleanup at sea.

Huge swaths of homes contaminated, groves, cropland and pastures poisoned, water supplies rendered non potable. This is just one of the nightmare scenarios that have been left out of the Government’s handling of this disaster. Or should I say MMS and BP’s handling of the “incident” Some incident. Well look on the bright side, maybe the Federal Reserve will have just enough paper left to print up one more bailout. I would love to sell my land and move to Canada.

Oil and water do not mix. Neither do deep sea environments and shoddy engineering. Nor do wild experiments with limited knowledge and even less ability to correct. But apparently corrupt government, bought out scientists and greedy corporations do just fine together.

Wednesday, May 19, 2010

MMS Oil Fines Are A Joke

What to know the difference between the EPA and MMS? Under the EPA, if you spill 25,000 gallons of gas in the soil of Maryland, you will pay $4,000,000 in fines and over $34,000,000 in total other cost. Under the MMS you can spill between 275,000 and 2,000,000 gallons a day and have your fine limited to $35,000 in fines and $75,000,000 in total cost. But as always the devil is in the details.

Interior department rules limit MMS to maximum $35,000 fines per incident. Of course these can be added up but the basic unit of infraction is a joke. We will not even discuss the collusion and corruption which is being exposed in the relationship between MMS and big oil. The odds of actually receiving any type of fine at all are miniscule. As reported in a previous post, in the last 18 years, the agency has levied a bare million dollars a year in fines. This is the amount charged; the amount collected was a fraction of that. All this on an industry drawing billions in profit from public lands. Offshore drilling racks up over 3 major violations a month and has a safety record among the worst industries. BP has paid barely $580,000 in the last decade – it made over $5,600,000,000 in the last 3 months. Equalizing those numbers to a monthly rate BP which had over a 12 major incidents in that time paid barely $4,100 a month while making $1,866,666,666 a month. That is 0.0000002589 percent of profits while committing major violations 10.00 percent of the months.

I realize those numbers are hard to grasp and that is part of the magic MMS and their corporate buddies use to get away with theft and corruption. They overwhelm the public and we have to fall back upon a trust that the regulators are doing their basic jobs. MMS is clearly not doing its job, in fact they appear to be more a public relations and cost control arm of the oil industries than a servant of the American people.

Unfortunately this “cozy” relationship as Obama puts it was not limited to Bush politics. Even the normally responsible EPA has become less and less likely to punish corporations with fines that would actually punish behavior effectively. In 2001 Exxon was fined $4,000,000 for spilling 25,000 gallons of gas in Maryland. A month ago the EPA fined and received $418,000 for a spill of 45,150 gallons of gas in Oklahoma. That is a huge degradation in the punitive impact. For an industry that rounds its financial statements up to the nearest million a $418,000 fine will not even be a footnote on their profit report.

The best way for the Obama administration to let the corporations know he means business is to start by cleaning up his own house. Starting with MMS officials need to be sacked wholesale and criminal investigations begun on them. The fine limits of $35,000 per incident and $75,000,000 total need to be scrapped. Not raised but done away with. In an industry of unlimited profits the risk for flagrant abuse needs to be unlimited.


EPA, $418k fine for Magellan oil

$4 million dollar fine for Exxon

The American Meltdown, MMS fines since 1990

Tuesday, May 18, 2010

A Modest Proposal Regarding the Gulf Oil Spill

The AP quotes British Petroleum CEO Tony Hayward as reassuring us that the “incident’ in the gulf is going to be just fine. "I think the environmental impact of this disaster is likely to have been very, very modest.” Well, there you have it – we are all worrying for nothing. I mean BP and the scientists cannot tell us how much oil is leaking, where it is going, how it will disperse, what chemicals they are dumping in the water, how long the oil will – well you get it – they cannot tell us anything with certainty. But Tony is sure that it is going to be “very, very modest”

Perhaps I should look on the bright side. Instead of focusing on the biological impact of millions of gallons of a poison known for its almost permanent toxicity, I need to look on the bright side. Yes, yes, perhaps that all we need a nice chat with Dr. Phil.

Let’s imagine the upside in all this. Oil is known for its ability to disperse light into prismatic sheen. Imagine the tourist’s amazement when they see the sun rise over the gulf and all that southern sweet crude converts mere sunlight into a rainbow light show. Disney pays millions each year for their fireworks displays over Orlando. But, now BP has given the gift of eternal rainbows to everyone near the beach. Everyone from tiny vending stands to 4 star hotels will see an increase in tourist value all for free thanks to the quiet people at BP.

There must be other ways to turn this frown upside down. Oil is much denser than water so it can absorb heat from the sun far more efficiently. With the modest help of BP our gulf waters will know warm up even sooner that before. Beach tourism can start as early as a month or more earlier and last longer into the Fall.

Here is another modest benefit to make all you grumpy grumps feel better about oil spills. Do not underestimate the increase in employment this will create. Rich people will need their beaches to remain white at all costs so people will be employed taking clean sand from other people’s beaches or even wasteful national parks and carting it to Palm beach. Let us not focus on the mess of cleaning up tar and dead animals – let’s just think of the job opportunities. This economic boom should be long term too. Oil last a long time. Plus imagine the long term careers in oncology as petrochemicals work their way through the ecosystem.

If everyone will quit being so gloom and doom even the worst elements have a happy face. Your beach got hit with a slick? Dead pelicans and dolphins litter your sand? Dispersants created some sort of mutant shrimp that eat lycra out of swimsuits and belch toxic hexane?  Do not worry; even this can be made into a grand opportunity with a modest rethinking. So you think you have a toxic, filthy, blacked, death strewn nightmare on your hands? No, my friend you have prime shooting locations for SciFi channel made for TV movies. Not only will you have a new business opportunity but maybe you can eat lunch with Lorenzo Llamas.

They really need to get the news media working on this hidden story. This is the kind of feel good line that just cries out for Katie Couric’s pixyish little touch. I think Tony Hayward was being modest himself. With a little positive thinking we can look on this as BP’s contribution to a new and exciting tomorrow.

P.S.  Golly I am so excited about this.  I already thought of a modest way to improve tourism thanks to the folks at BP.  We can market our beaches to the Russian and East Europeans.  They would love our warm weather and they are already used to pollution.  Here is the ad campaign:  "America's Gulf Coast - it's the other Black Sea, only warmer and with free suntan oil."

Monday, May 17, 2010

The Constitution Was Written For Child Molesters Too.

May 17, 2010 the Supreme Court ruled 7 to 2 that is was constitutional to hold inmates beyond the time ordered by the trial process. Anthony Scalia and Clarence Thomas were the sole opposing Justices. Two of the most conservative people ever on the court were the only ones to stand for justice and process of law against tyranny. In a single stroke they invalidated the 14th amendment which guarantees due process and equal treatment under the law. The 14th amendment has been the touchtone of civil liberties and it has not be tossed into the junk pile of hysterical overreaction which led to the Patriot Act and US citizens being targeted for death by the CIA.

Basically you can be charged with a crime – held and put to trial, receive a sentence and serve that sentence and still be held at the whim of authority. Today it is being applied only to people convicted of a vile act. But it is the beginning of the end when we allow Constitutional and civil rights to be tossed aside by anger or revulsion. Even in some of the darkest days of the West people have depended on the rule of law. Joan of Arc was charged with treason, heresy and witchcraft yet even she had the slim hope of a trial. Rapist, mass murderers and even cannibals have been set before a court and lived and died by that judgment. The Nazis were held before the Nuremberg court and bound by their resolution. No one hauled Carl Donitz back into jail after his sentence was served even though his wolf packs sank hospital ships and civilian liners.

The court in fact ignored any arguments regarding the 14th amendment and focused on the power of government to punish crime and maintain security. Security is always the watchword when freedom is being destroyed. If the citizens lose the right to equal application of law then we have no hope of fending off further assaults against our liberties. Benjamin Franklin stated: “They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety.”

I cannot think of a single act more dangerous in a time when the Federal government is continuing a slide towards martial governance. With restraints on Executive power declared meaningless by John Yoo – a middle level department of Justice Attorney and then rushed into concrete acts of secrecy and violation of treaty and congressional rights by Dick Cheney and the George Bush White House but kept in place by the Obama administration. With an Attorney General that declared the Geneva Convention “quaint” and stated that the constitution does not cover the writ of habeas corpus. With Department of Justice attorneys called “terrorists” because they dared to extend legal protection to detainees. All of this is occurring in an America whipped into frenzies of paranoia and despair. Now to have the Supreme Court striking down major principles of the Constitution stretching back all the way to the founding of English Common law is an unmitigated disaster for freedom in the United States.

I could discuss the particulars of the crimes and acts invoked in the ruling. But they are irrelevant. If we were discussing sentencing or even evidence they may be pertinent. But that is not the issue at stake here. It is the rule of law. If you are held before a jury of your peers and convicted under civil law are you or are you not in a contract that binds both ways. If authority can constantly reach out and constrain you beyond the actions called for in a court of law then we are lost as a free people. This is precisely the mechanism used by the USSR to enprison Aleksandr Solzenitzen and millions of other "disturbed" people in the gulags of Siberia. No matter how low or loathsome the citizen being so treated the constitution must apply to the few or it is lost to us all.

I feel we go to sleep tonight in an America that is fundamentally coarsened and weakened and awake tomorrow in a world where people like Adams and Jefferson would have been silenced long before they ever wrote a word in Philadelphia. Actually that is such a pale and impotent analogy to make before such a disaster. The rule of law is the loss before us and it clears the descent to a naked despotism that George III never dreamed of.

Why Banks Aren’t Lending

A lot of speculation has been tossed about as to why the big 6 American banks are not lending. The TARP bailout was supposedly given to them in order to unfreeze credit and get lending going again in the US. A lot of anger and frustration has been vented on them for their total lack of doing so.

None of this anger has translated to action against the banks of course. Why is this happening? I think the answers are clear, we do not see them because we do not want to. There are five major reasons why the big 6 banks in America are not lending money to the public.

First, half of the big “banks” are not banks at all but investment houses. Goldman Sachs, Morgan Stanley, JP Morgan Chase are only banks because the Federal Reserve designated them banks so they could access the unlimited liquidity of the Fed printing presses. Only Citigroup, Bank of America and Wells Fargo were and are banks in the traditional sense. With these brokerage houses magically turned into banks they also get access to FDIC insurance. Meaning while Goldman Sachs is selling people betting share on the latest spun sugar fantasy investment, the whole load of crap is backed by the US taxpayer.

Second, they are not loaning because the spread on money borrowed from the Fed at 0.25 percent interest and then invested in 10 year Fed bonds paying 3.56 percent is better and safer than profit from traditional loans. It is a simple matter of accessing Fed funds then using those funds to buy Fed bonds and let the interest spread roll in on capital that just got created in a flash of magic.

Third, they are not loaning because they aren’t supposed to. The second item guarantees that banks will not be punished by the Federal Reserve for not loaning to Main Street because selling its debt is more important to the US government than any other priority. As long as banks are monetarizing the US debt by buying US bonds then they are fulfilling the most critical function of the Fed right now and that is pumping enough paper into the system so that our debt can be funded. This is the ultimate dues ex machine. By making investment corporations into phony banks, the Fed gave them access to borrow unlimited dollars from the government presses. This fountain of fiat capital is then invested in government bonds that no respectable source would touch and funds an insupportable US debt. The nice little interest spread on free Fed money and Fed bonds is Uncle Sam’s way of paying the banks for doing its dirty work.

A little extra problem with pumping all this created money into the system is that it must ultimately create inflation. More paper by definition lowers the currency value. This is a real problem but as long as the created wealth is used to buy debt, the capitol stays locked up and is not released as currency into the economy. This will contain the problem in the short run. The US government probably never planned beyond the short run in its history. With bankruptcy staring them in the face they certainly cannot worry about anything beyond short term fixes.

There you have it, three reasons why the banks are not loaning money to the public. They aren’t banks to start with. They don’t have to with profits from US bonds. Finally, they aren’t supposed to as long as they monetarize the US debt.

Saturday, May 15, 2010

A post script on the MMS scandal

In my post on MMS and its outright illegal activities in the name of the oil companies I mentioned that they had issued hundreds of drill permits without the proper environmental and safety approvals.  One in particular stood out - want to guess which one?  That's right - good old Deepwater Horizon was drilled over protests and in violations of law.

You just could not make this up - its like a clown circus.  God I hate clowns.

Friday, May 14, 2010

Government Aids Oil Companies In Breaking Law

The department of the Interior’s MMS or Minerals Management Service is apparently going beyond passively ignoring the abuse of mining regulation and has begun to actively facilitate the abuse and even outright breaking of those laws. As discussed in a previous post, the MMS has long ceased to be a guard dog of the public lands and has become the lapdog of the industry it is charged with regulating. Wow, that is unusual for an American regulatory body, usually like the USDA, FED, SEC they are just right on top of things. Well, if you mean on top as in a rug under which corporate corruption is swept then you would be right.

According to sources gathered by the New York Times, the MMS has a long record of allowing the oil corporations to drill without the permission from NOAA and other environmental agencies. NOAA is the National Oceanic and Atmospheric Administration – it is one of the agencies charged with monitoring the environmental impact of MMS actions. Its approval is required by law for all actions taken. Yet this law was routinely flouted by the MMS in order to smooth the way for corporate greed.

When asked about the lack of NOAA approval, MMS spokesperson Kendra Barkoff (I swear I did not make up that name – it is straight from the evil character list from the Bond movies!) stated that the MMS was in full consultation with NOAA. The law says agreement – not consultation. When asked about permits, Barkoff refused to answer.

MMS did more for industry than simply allowing them to drill without permits. They also issued permission for companies to write their own environmental impact studies and to ignore them all together in many cases. To their credit, there is a long list of scientists who are current or prior employees that have spoken up. The result was to be ignored, or have your report rewritten by a friendlier scientist or even by the oil industry itself. Warnings about leaking equipment and dangerous drilling were ignored. Ignoring whistle blowers was the rule all the way up to the top of the Interior department. Letters from scientists and Congressman where answered by silence.

Well, I have painted a sorry scene haven’t I? But at least we can be glad that things are changing now that the Deepwater Horizon “incident” as MMS deemed it, has occurred. Everything is better, the rules are being enforced and the people’s environment is being safeguarded. After all, Secretary Salazar has decreed that he will allow no new drilling until all concerns are answered.

A search of the MMS website shows that in the weeks since the “incident”, MMS has given application to drill APD approval to 15 drilling plans. Despite the fact that this data is on their very own website, the Interior department has denied issuing any permits and MMS simply refuses to answer. Seems we can add direct government collusion and criminal activity to the list of things leading to the great American meltdown.


New York Times, May 13, 2010,

MMS database on APD approvals

For want of a nail… an oil rig is lost

"For want of a nail, the shoe was lost; For want of the shoe, the horse was lost; For want of the horse, the rider was lost; For want of the rider, the battle was lost; For want of the battle, the kingdom was lost; And all for the want of a nail." This was Shakespeare’s lament for Richard III. It bemoans the great consequences of small failings in complex systems.

Today, America is facing an environmental and economic disaster of unknown proportions in the Gulf of Mexico. Apparently, we may be facing this calamity from something as simple as a dead battery. The House Energy and Commerce Committee's subcommittee on oversight released documents which indicate that among several failings the critical blow out preventer had a dead battery that should have been used to fire off metal rams to seal off any blowout in case of an emergency.

A dead battery. The drilling rig is state of the art technology - complexity piled upon complexity. It had accounted for 260 failure scenarios and built complex systems to recognize and contain them. But there was no one and nothing to check on a dead battery. If it were not for the photos I just saw of dead dolphins I would laugh. This is what our science and technology comes to when the drawing board meets the sea.

We have, as usual designed a system so complex that no one can fully comprehend it nor predict its behavior. Our forays into poking holes in water so deep it creates ice in the Gulf of Mexico have not gone all that well. Apparently, they were based on hopes and prayer and a lust for profit. Like the financial spider webs woven by Goldman Sach’s “fabulous Fab” we have created a system we cannot control.

We will attempt to mitigate the problems by tossing yet more complexity at the situation. More technology, more checklists, more bureaucracy. The American meltdown has much in common with the Roman and French meltdowns before them. Each society tried to fix the problems caused by its systems by piling more of the exact type of system on them until they collapsed under their own weight. When Rome could not finance its empire, it invaded neighboring lands to loot them of gold and slaves. This added more territory to manage and increased cost – creating a need for even more expansion and thus more expense in a fatal loop that ended in collapse. The corrupt and incompetent bureaucracies of France could not perform their duties so the French added layer upon layer of new equally corrupt and incompetent bureaucrats until eventually the debt burden caused taxes to rise to rebellious levels causing a little interlude call the Terror. American is following the same roads down to meltdown. We try to fix systemic problems by expanding the systems. We try to solve our debt problem by borrowing and prevent engineering hubris by making the systems more complicated.

What we needed was a diehard battery and someone capable of checking on it once in a while. What we will get is economic collapse along the gulf and environmental destruction beyond our capacity to understand.

Wednesday, May 12, 2010

Gulf Oil DIsaster - we don't know should mean we don't do...

Back to the idea of overcomplexity.  I was listening to a panel of scientists discussing the Gulf oil disaster or “incident” as it is referred to by its government regulators. The panel was stuffed with people picked for their expertise in Oceanography, oil, and the environment. The moderator was asking them a series of questions mostly centered on the economic impact to Florida. The panel was answering those questions with answers all centered on their ignorance. No one of these experts knew anything it seems.

Who can tell us how this will affect the life cycle of the gulf? We have no idea. What will happen to oil that sinks to the bottom? We have no idea. When will we be able to stop the outflow of oil? We have no idea. Where will the deep ocean currents carry the oil? We have no idea. Why does 90 percent of the spilled oil go unaccounted for? We have – you guessed it – no idea.

I do not mean this as a diatribe against science. Although one does wonder where the industry managed to find scientists to claim they actually did know something. During their application process dozens of scientists expounded on the safety and safeguards BP had in place. They filed briefs on how swiftly and completely any spills could be dealt with. They drew charts explain exactly where any slicks would go and where they could be contained. Now all such claims to knowledge of any sort on any level of certainty seem to have vanished. Reminds one of the gulls at the beach – all squawking around when there is bread to be eaten. Then gone the moment a storm is brewing.

The point is, that if we do not have sufficient information we should not be conducting experiments which place our economy, our environment and our very lives at stake. If we do not know how to seal wells deep on the ocean floor – then perhaps we should not drill them. If we do not understand how oil spills affect the worlds primary food chain – perhaps we should not exposed them to that risk. If we do not understand the engineering necessary to undo something – perhaps we had better leave it undone.

It is our cult of progress and the belief in the omniscience of science that allows us to commits such huge acts of hubris. Not that this is limited to oil drilling either. We are joyfully going about altering genes on a wholesale level when our knowledge of the complex interactions that will follow is tragically, pathetically limited. We are pumping scores of pharmaceuticals into our bloodstreams with little to no knowledge of how these complex chemicals react in combination with each other. In fact, rarely is our knowledge fulsome enough to predict the future outcomes of our adventures. Again, not that science is cause behind these issues – as in all things American - money is the mover unmoved. But, at the very least, science with a small s needs to quit acting like Science with a large S.

I grew up in central Florida, I have been to Epcot uncounted times and I remember the speech before you enter the “living seas” exhibit. “We know more about the surface of the moon than we do about our own oceans” Gee,who knew?

Saturday, May 8, 2010

Pull the plug on Wall Street’s Computers Before They Cut Our Throat.

Our entire civilization has become so complex that it has almost ceased to be understandable in any rational terms. Nothing is safe from the super complexity of modernity.  The price of something as simple and basic as onions in the corner market does not depend upon things as simple as weather and fair trade any longer. No - now food is a commodity, it is traded, speculated for and against and reduced to a data set for most of its time before ending up on top of a hamburger. As a commodity it is shipped all over the world in subsidized transport burning oil like it was water to move onions across the globe in concord to orders issued from a great complex of wholesale distributors. Computers calculate bids and sales from commodity brokers who are watching flickering internet displays projecting future prices based on complex calculations of weather, oil cost, possibility of war or interruption of supply, current and future production, demand and a million other factors.

Onions are a mere example, the same thing happens to all raw materials and supplies. Finance is subject to even more torturous complexity in the modern search for more and more profit from less and less real worth. Somewhere a futures contract for the delivery of those onions from fields in outside Santiago to markets in Sydney is bundled in with millions of other contracts and put forward as a subcomponent of a commodities derivative being traded across internet lines from New York to London to Berlin then over to Shanghai. This commodities derivative will be bundled with some bundled mortgages securitizing a security being traded in Chicago against surety debt swap agreements being negotiated in Wall Street to provide funding to a firm which is backing a Bond for roads in Athens being used to guarantee a loans coming from investors in Dubai and Indonesia.

It is all just too absurd. To quote “Fabulous Fab” of Goldman Sachs we are “standing in the middle of all these complex, highly leveraged, exotic trades created without necessarily understanding all of the implications of those monstruosities!!!” This was shown in excruciating detail on Thursday May 6, 2010 when the New York Stock exchange’s Dow Jones Industrial index dropped nearly 1000 points in a matter of minutes. Trillions of Dollars of supposed value was vanishing in less time that it takes to boil an egg. Even more ridiculously, the market was being driven by computer programs working faster that men can think or respond. Insane supposedly impossible things were happening. Major corporation’s stock value dropped to zero. Not a penny – but zero. Meaning an infinite number of people could buy the company for no pennies – nothing. Similarly, a few stocks went up over 3,300,000 percent in seconds.

This is ridiculous. It would funny if it had not placed the fortunes and livelihoods of millions of people at the mercy of a trader’s fat finger trying to use an I phone virtual keyboard sitting at some Manhattan sushi bar. This is actually one of the theories being tossed around - how amazingly tragic. Another theory is perhaps it was insider trading trying to bring about potential for huge profit. Supposedly the Exchange was going to nullify all trades during that period where variances exceeded 60%. We will see if that really happens. If it mean profit for the few from the many - I doubt it will be reversed.  Maybe it was a cyber attack being tested. If that is so, then clearly we need to unhook ourselves from the vulnerable complexities that allowed it.

How this happened is therefore still under debate. But that it did happen should be a ringing alarm that our financial system like most of our society is over complicated and under regulated. We as a nation need to do what some financial firms did yank the plug. Yes it is true some firms realized that their technology was out of control and literally pulled the plug on their computers to try and break free from their tyranny. As Scotty of Star Trek said “the more you over think the plumbing, the easier it is to stop up the drain.”

Wednesday, May 5, 2010

Regulators Calls the Gulf Disaster an “Incident”

Minerals Management Service is a division of the Interior Department of the US government. Its purpose is to manage and regulate the people’s resources that lie in offshore American waters.  On the main page of its website it lists important current issues in a column on the right side of the page. Number one is an announcement that Secretary Salazar has approved windmills for Cape Cod. Number two is something entitled “Deepwater Horizon Incident”

For those of you who are confused the “Deepwater Horizon Incident” is also known as the unprecedented disaster that is pumping unmeasured amounts of oil into the Gulf of Mexico. Destroying Fisheries and bird breeding estuaries. Devastating tourism and disrupting shipping throughout the gulf and into the Mississippi river.  That's quite an incident.

I would hope that title proves some rhetorical point regarding the MMS’s attitude towards maintaining even the bare minimum of regulatory responsibility. I won’t hammer it into the ground because I think that off the cuff remarks reflects the heart of their true attitude. Do they really think millions of Americans are bringing up their webpage to see photo ops of the Interior Secretary announcing the sale of yet more leases in the gulf? This kind of asleep grasp of the facts cannot be explained by mere incompetence alone. I think it shows the cozy, just kidding attitude that the US Government takes in all its regulatory relationships.

Clearly, Interior and the MMS is not the only agency with a hands off attitude to the corporations they allegedly regulate. The FED, SEC and Treasury are still bailing out the recent financial meltdown. Commerce and its agencies are so afraid of offending China and the American Retail corporations that stores are still filled with dangerous Chinese imports. The list goes on and on. Washington creates regulatory agencies staffs them with sheltered workshop incompetents and patronage appointments and they go blithely on regulating no one and nothing.

American bureaucracy has failed by inability or by design to manage any of the issues set before it. This failure is exceeded in history only by the multilayered impotence of the French just prior to the “incident of 1789”. But even by these standards the Interior department is an appalling example. Under its watch, taxpayers build roads so lumber companies can cut trees in the last remaining virgin forests. Coal companies blast the tops off of 500 Appalachian Mountains using the equivalent of a Hiroshima load of explosives each and every week of the year. Oil companies destroy economies and environments and get hit with pathetic little fines and apologetic reminders to follow safety regulations.

Now mind you MMS regularly posts misleading press statements that would lead you to think they are aggressively pursuing violators. Those press releases pass the smell test about as much as a gulf beach covered in dead fish. From release to release they change the parameters and they never mention enough in one statement to get a full picture. You have to hunt for the same data on the same events and try to do your own analysis. The closest they did to full disclosure of their true impact on violators was in an April 2008 release # 3806. There we can learn that in the period “Between August 1990 and January 2008, MMS initiated 623 civil penalty reviews that resulted in 498 civil penalties. Operators have paid a total of $18,591,792 in fines.” Eighteen million in fines over 18 years for an industry that require almost 3 regulatory reviews a month? Fines were reviewed in 2008 and set at the rate of $35,000 per incident. With oil revenues in the billions of dollars, once can assume that fines such as this would not even show up on their income statements due to rounding limits.

By the way on the page specifically for the gulf region MMS has another important announcement directly beneath the “incident’ – this vital message? – “2010 offshore industry safety awards postponed”. You just cannot make this stuff up – it’s pathetic.

No my friends, these are not guard dogs of the nation’s resources. The MMS and the Interior department like most regulatory agencies have been so neutered as to be mere accessories to the corporate press offices. Their guiding regulations and authority has been so diminished as to make it clear what the government wants from them. Trouble free reports and hands off investigations so the corporate campaign funds keep rolling in. Happy rich corporations mean happy cash laden lobbyists and that means reelection and kickbacks. Our government’s loyalties lie with the industries they are charged with monitoring and not with the American public.

MMS website

MMS press release

Monday, May 3, 2010

Greenspan Said "Hush the Public May Hear" in 2004

Huffington Post contributor Ryan Grim reported more evidence of the overweening arrogance attached to the American lords of finance. Fed Chairman Alan Greenspan is on record urging the members of the Federal Reserve to restrict conversations on the housing bubble because it may draw in the ignorant masses. Specifically he is quoted as saying the following: "We run the risk, by laying out the pros and cons of a particular argument, of inducing people to join in on the debate, and in this regard it is possible to lose control of a process that only we fully understand."

This episode is detailed in a transcript of Fed March 2004 meeting. It is only the latest piece of information to leak out making two things all too clear.

1) First, the Federal Reserve and banking officials knew we were in a giant real estate bubble at least as early as 2004.

2) Secondly, Greenspan at least was worried about involving anyone in the debate other than the certified experts of his self justifying inbred board of officials. 

Greenspan, the Federal Reserve Board have their fingerprints all over the paper trail leading to the great American meltdown which has cost us close to 9 trillion so far and counting. I believe his language is within the realm of suppression and conspiracy. Greenspan needs to trade his Italian pinstripes in for some nice prison orange.

More Bad News About Oil

For those of you who read my last post, you know I think that the big oil corporations will seek to maximize claims of turmoil and interference in the transport and refining of oil and use it as an excuse to hike prices. Typical manipulation of the market to maximize profits while minimizing service to the US economy.

Well that was the bad news, this is the worse news. Unlike US consumption of oil which has declined 5% the use of oil in China has risen by almost 73% in the same period. The recent huge recession has eased use even further. Just to be clear – most of this reduction has not come about through increased efficiency. The reduction in US oil consumption is mostly a factor of our economic meltdown to a purely consuming nation. The fact is running forklifts around unloading goods made in China uses less oil than producing the items here.

China’s increase shows no signs of abating and the Indian and Chinese economies are showing signs of picking up. Despite common thought – the Asian super economies have become large enough to be self supporting. Unlike the US - both China and India are producing more middle class people and the middle class is the engine of economic growth. As a natural effect of this growth their demand for oil is increasing. Soon it will consume the tiny surplus between world oil production and demand.

Once that margin of surplus is gone – the price will rise to whatever the market will bear. Does anyone think we can outbid the Chinese on those oil shipments? Not a chance. Once oil supply dips into a world shortage prices will fly through the roof. It may not happen this year or even in 5 years but it will happen. The only way to avoid this disaster would be a giant meltdown in the Chinese and Indian economies to match the scale of our own. Since both nations are largely following the exact economic path we followed decades ago – that seems likely. But not in time to reduce oil pressure on the US in the incoming years. There is going to be a huge increase in oil prices to balance supply to demand and odds are we will never see another downward trend in oil prices as peak oil is either here or close enough for speculators to smell it.

We have squandered every chance we ever had to correct America’s dependence on oil and soon the time will come to pay the piper. What little real economy remains in an America globalized and financialized to death will crumble under oil prices that simply will not support the American way of doing business. It is no one’s fault but our own. President Carter warned us in the 1970s that we had to reduce oil consumption. If we had increased energy efficiency just 1percent a year from that time the United States would be an oil exporting nation today. America is headed towards an economic meltdown because we are short sided hedonist worshipping credit and short term profit over real solid national values.

Saturday, May 1, 2010

Gulf Oil Rig Disaster Will Reap Windfall Profits

Now it is unlikely that BP will be able to turn this horrible disaster to their advantage but you can bet your bottom dollar the other oil companies do. The reality is that this spill is right in the heart of America’s oil region. The slick and its cleanup and containment will create some delays in shipping oil into the Gulf refineries. This will create a delay and possible shortfall in gasoline production just as the summer driving season begins.

This very real problem will soon be portrayed as a huge one. The oil companies will complain about the Herculean efforts that are required to get raw oil into their refineries. They will explain how nobly they are trying to keep production up. But they just cannot. So the only thing left to do is raise prices. Otherwise profits may fall and that is not ever allowed no matter how much fault lies with the oil companies. Profit is sacred – employee salaries can fall and prices can rise but holy profit must ever increase. Gosh darn it we are sorry but it’s not our fault.

Well I could explain more – but gee we have all been through this drill before. So get ready for a big spike in gasoline prices. Oh and if by chance the crisis in the gulf gets resolved – they will certainly need to patch up some infrastructure and close a few pipelines here and there. Oh yes, this is going to put them price back up to $4.00 a gallon before it is over. Hide and watch as the great American meltdown reaches into your back pocket again.