Speculator scapegoats

It has become fashionable to blame "speculators" for the rise in oil and food prices as well as the sub-prime mess. The Almighty Economist cogently explains why that is mistaken, at least if you care about facts:

Investment can flood into the oil market without driving up prices because speculators are not buying any actual crude. Instead, they buy contracts for future delivery. When those contracts mature, they either settle them with a cash payment or sell them on to genuine consumers. Either way, no oil is hoarded or somehow kept off the market. The contracts are really a bet about which way the price will go and the number of bets does not affect the amount of oil available. As Mr Harris puts it, there is no limit to the number of "paper barrels" that can be bought and sold.

That makes it harder for a bubble to develop in oil than in the shares of internet firms, say, or in housing, where the supply of the asset is finite. Ultimately, says David Kirsch of PFC Energy, a consultancy, there is only one type of customer for crude: refineries. If speculators on the futures markets get carried away, pushing prices so high that refineries run at a loss, they will simply shut down, causing the price to fall again. Moreover, speculators do not always assume that prices will rise. As recently as last year, the speculative bears on NYMEX outweighed the bulls.

The speculators by definition do not consume these commodities. They don't hoard or stockpile them. They merely hold temporarily hold the rights to them. The end result is roughly the same amount of product delivered at the appointed time for a price acceptable to the eventual buyer.

Indeed, because the speculator cannot actually take delivery (lacking tankers or silos), they are in some sense at the mercy of consumers because they absolutely must sell their rights before the futures contract's delivery date. These people are taking risks, risks that could blow up in their faces. That possibility of total loss to the speculator keeps them reasonable.

Is it possible for that price to be higher than it would be without speculation? Yes, but it is also possible that the price is lower than it would otherwise have been. This kind of financial maneuvering can help reduce risk to both producers and consumers, and thus stabilize price and supply.

Of course, the logic is different when these outsiders get into the business directly. Different, but with the same result. If these people are paying too much, they're going to get hurt by it. If they're getting a good deal, other people can get that deal, too. Worst-case scenario is that there's volatility and then things return to normal. The best-case scenario is that our agricultural infrastructure gets a lot better. I can live with that.

The Iraq War funding bill

Somewhere in Fallujah, Iraq, November, 2008:
"Private, the enemy is approaching; why aren't we moving?!?!?"
"Sir, we're out of gas!"
"Private, why didn't you fill up before we left on patrol??!?"
"Sir, I did, but there wasn't any more! 6 months ago Congress cut off funding for the war!"

... in the ensuing firefight ...

"Sergeant, I only have 5 rounds! What should I do?!?"
"Write your Congressman. Now throw some rocks, corporal!"

... as they flee the city ...

"Where's my air support??!"
"Sir, the Air Force dropped their last bomb yesterday in Sadr City. They all flew back to Germany."

Iraq war funding is up for a vote again. The way the war supporters talk about it you'd think voting against it will mean pulling the plug right in the middle of the war. Get real. It's May. The bill is for funding in the next fiscal year, which begins in October. Even if they don't have the money for the war, there's still plenty of money at the Pentagon for an orderly withdrawal.

If they have any semblance of sense at the Pentagon, they already have plans on the books for how to get US troops out of Iraq within 90 days. Hell, I'd bet money they have a plan to get us out in 45 days; they have plans for everything. There are any number of reasons why that could happen, and thus why they should plan it. Political pressure at home could force it. North Korea could invade the South. Iraq could stabilize, or it could get much worse.

In other words, if the funding bill doesn't pass, we can remove our troops in an orderly and safe fashion*. They talk like pulling the plug on the war means stabbing our soldiers in the back. If Congress votes to end (our participation in) the war, we will leave. The only way soldiers would be abandoned is malice or incompetence from the executive branch.

* At least for our guys, if not the Iraqis.

We all own stolen goods

You very likely own stolen goods. The gas in your car, the circuits in your cell phone, the diamond in your ring, the chemicals in your lipstick or shaving cream — even the plastic in your computer may be the product of theft. Americans buy huge quantities of goods every day that are literally stolen from some of the world’s poorest people. These thefts are permitted — indeed encouraged — by an archaic rule of international trade that violates the most fundamental rule of capitalism: to protect property rights.

From a blogger at the Cato Institute, which is quite surprising, but makes a certain perverse sense. I don't think the prescription would work, but it makes for an interesting thought experiment:

Say that China buys $3 billion worth of oil from the regime in Khartoum. The correct response on a property rights approach is for the United States government immediately to announce a Clean Hands Trust for the People of Sudan. This trust is a bank account that the U.S. government will fill until it contains $3 billion. The money to fill the trust will be raised from tariffs on Chinese imports as they enter the United States. The money in this Clean Hands Trust is to be held for the people of Sudan until a minimally decent, unified government is in place. At that point the $3 billion will be turned over to the true owners of the stolen oil: the Sudanese people.

a carbon tax is more complicated than I thought

Very interesting analysis, especially re: non CO2 greenhouse gases and the incredibly difficult problem of figuring out exactly how big the external costs of coal or any other energy source are.

Can we boycott the Saudis? Please?

What it's like to be an unmarried girl in Saudi Arabia. Cruel, stupid, and just plain sad.

Apartheid for Women

Saudi Arabia is basically an apartheid state for women. Their whole lives they're basically treated like they're mentally ill children. Human Rights Watch has a press release about their new report on the subject. While South Africa's evil policies made them international pariahs, Saudi Arabia doesn't even get dirty looks. Can we boycott them? Please?