Locomotive Mule

From The Scotty Show, Now With Dana: Better, Prettier Lies Told With A Whiter Smile:

Q And last thing. Senator Obama is saying speculation is a big part of this. The administration seems to reject that; Secretary Bodman over the weekend saying in Saudi that speculation really is not the issue here. But the Saudis themselves came out yesterday and said they do believe speculation is a problem. So where does this White House –

MS. PERINO: We believe the fundamental problem is the basic one of law – the basic law of supply and demand. We do think that speculation could have impact on the day-to-day volatility in the market. But over the long term what we have seen is a leveling off of supply and a dramatically rising – rise of demand, and that is what the fundamental problem is.

But in terms of the day-to-day volatility or turbulence in the market, perhaps that can be attributed to speculators, and the CFTC is looking into that aspect and all the other aspects that go into this, as well.

Q And a follow to that. Congress is actually perhaps considering legislation to set stricter limits, or even ban trading on energy futures in some markets. Is that something that the White House – I mean, what’s your position on that?

MS. PERINO: I think the best place for that discussion and that review is at the CFTC, and we’ll let that independent agency look at it and then review any of their recommendations. I know that Walter Luken is heading that up.

Okaaaayyyy…. Then let’s get Mr. Luken up there to the Hill and get him squirming:

NEW YORK (CNNMoney.com) – Near-record oil prices could quickly fall by half if Congress were to rein in speculators, according to testimony Monday from a hedge fund manager and oil company adviser before a House subpanel.

Michael Masters, of Masters Capital Management fund, told the subcommittee of the House Energy and Commerce Committe that - with greater regulation - oil prices could drop to $65 or $70 a barrel within about 30 days.

The price of crude oil today is not made according to any traditional relation of supply to demand. It’s controlled by an elaborate financial market system as well as by the four major Anglo-American oil companies. As much as 60% of today’s crude oil price is pure speculation driven by large trader banks and hedge funds. It has nothing to do with the convenient myths of Peak Oil. It has to do with control of oil and its price. How?

What would be the effect of a big increase in the volume of purchases of near-term futures contracts? If investors were all equally informed and risk neutral, an increased volume of purchases would have no effect on the price. In such a world, there would be an unlimited potential volume of investors out there willing to take the other side of any bets if the purchases were to result in a price that was anything other than the market fundamentals value. But with risk-averse investors or with differing information, the answer is a little different. For example, I might read your willingness to buy a large volume of these contracts as a possible signal that you know something I don’t. For this reason, standard financial “market micro-structure” theory predicts that a large volume of purchases may well cause the price to increase, at least temporarily, until I have a chance to verify what the true fundamentals value would be.

In a scramble to find a fix for energy prices, Congress has tried (and failed) to strip tax breaks from Big Oil, to open protected sites for exploration and drilling, and to jump-start a new era in nuclear power.

Now, Capitol Hill is zeroing in on speculators and the legal loopholes that some lawmakers say are adding as much as $70 to the price of a barrel of oil.

“Energy speculation has become a fine growth industry and it is time for the government to intervene,” said House Energy and Commerce Committee Chairman John Dingell (D) of Michigan, at hearing on Monday.

Fixes in the works on Capitol Hill range from new constraints on speculators – including a 50 percent margin requirement on financial speculators, full disclosure of all trading by investment banks in all markets, and prohibiting investment banks from holding energy assets – to more funding and regulatory mandates for the Commodity Futures Trading Commission.

“Given the grave threats that we face, our national security agencies must have the capability to gather intelligence and track down terrorists before they strike, while respecting the rule of law and the privacy and civil liberties of the American people. There is also little doubt that the Bush Administration, with the cooperation of major telecommunications companies, has abused that authority and undermined the Constitution by intercepting the communications of innocent Americans without their knowledge or the required court orders.
“That is why last year I opposed the so-called Protect America Act, which expanded the surveillance powers of the government without sufficient independent oversight to protect the privacy and civil liberties of innocent Americans. I have also opposed the granting of retroactive immunity to those who were allegedly complicit in acts of illegal spying in the past.

“After months of negotiation, the House today passed a compromise that, while far from perfect, is a marked improvement over last year’s Protect America Act.

“Under this compromise legislation, an important tool in the fight against terrorism will continue, but the President’s illegal program of warrantless surveillance will be over. It restores FISA and existing criminal wiretap statutes as the exclusive means to conduct surveillance - making it clear that the President cannot circumvent the law and disregard the civil liberties of the American people. It also firmly re-establishes basic judicial oversight over all domestic surveillance in the future. It does, however, grant retroactive immunity, and I will work in the Senate to remove this provision so that we can seek full accountability for past offenses. But this compromise guarantees a thorough review by the Inspectors General of our national security agencies to determine what took place in the past, and ensures that there will be accountability going forward. By demanding oversight and accountability, a grassroots movement of Americans has helped yield a bill that is far better than the Protect America Act.

“It is not all that I would want. But given the legitimate threats we face, providing effective intelligence collection tools with appropriate safeguards is too important to delay. So I support the compromise, but do so with a firm pledge that as President, I will carefully monitor the program, review the report by the Inspectors General, and work with the Congress to take any additional steps I deem necessary to protect the lives - and the liberty - of the American people.”

Whoopdee doo and la di da.

The moral of this story is that the Constitution applies to everything our government does, always and without exception. Ours is a government of limited powers, and if We the People have not granted the power to act through the Constitution, then the government has no power to act. Period.

– jlynne