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Old 2012-02-24, 04:32   Link #3021
ganbaru
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Join Date: Dec 2007
Location: Betweem wisdom and insanity
Republicans see "jobs bills" as election winner
http://www.reuters.com/article/2012/...81N0B320120224
The fact than thoses are ''jobs bills'' is still unsure, at the very least.
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Old 2012-02-24, 06:13   Link #3022
Vexx
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Quote:
Originally Posted by ganbaru View Post
Republicans see "jobs bills" as election winner
http://www.reuters.com/article/2012/...81N0B320120224
The fact than thoses are ''jobs bills'' is still unsure, at the very least.
This is like McCarthy in the 1950s and his blank sheets of paper that were "evidence" or "names lists".... Republicans did not generate a single bill last year out of the house I'd call a "jobs bill". Not one. Show the damn list, Boehner, lets see what you're pretending is a jobs bill list. (Hint: every bill is either a cut taxes to the hyper-wealthy or a weakening of air, water, pick-up-after-yourself, keep-employees-safe regulations that are there because too many businesses fscked up; therefore any "savings" would most likely be pocketed rather than used to "create jobs" based on actual recent behavior).

Even the conservative think tank American Enterprise Institute is making fun of their antics:
Quote:
"I have yet to see a single one that was actually a jobs bill," said Norm Ornstein, a congressional scholar at the American Enterprise Institute, a conservative Washington think tank.
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Old 2012-02-24, 09:10   Link #3023
Zetsubo
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Since I am no economist: I have some misconceptions I want to clear up.

1. How is it possible to create "Financial Products" that have no basis on tangible goods or services ?

2. Could someone explain the concept of "Futures contract" and why is this a "good thing" ?

I am asking these questions because it seems to me that alot of people are getting wealthy from simply moving around money in a short space of time. Whether through the stock market or some other financial institutions "products"

I am possible greatly undereducated in this matter... since to me one should only trade currency for physical goods made or actual services rendered (like getting a fee + interest for landing money to a company to build homes or even providing capital to insurance companies)

I don't think people should mix their "portfolios" in such a way that they "submerge high risk products" under the "high yield low risk products"

To me that is a contamination of the portfolio in the first place.

If the "bad product" fails... how do you isolate and extract its effects from the "good products"

Isn't this what caused the 08 crisis ?

Mixing bad debts with good debts ?

I want to understand how such a huge wealthy class of people can be created from absolutely nothing but shuffling around money form one "fund" to another and all these funds to is sit and "mature" but they do not go toward build factories or anything else that is long term.

Since the 1980's America has been sprouting billionaires and millionaires like weeds on the sidewalk and many of them are not like Steve Jobs who actually make something, they are people who just "shift money around by taking risks opportunities" on wall street.

This like the roaring 20's all over again with some major differences... but a collapse my occur that is worse than the 2008 if these people aren't regulated.

I guess that makes me conservative ? or socialist ? or commie ? or "liberal" ? What would I be called by populist mainstream pundits for my views ?

Remember: I am not fully versed on this so I am very open to being informed ... especially in lay mans terms by talking with other people.
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Old 2012-02-24, 09:36   Link #3024
Vallen Chaos Valiant
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Quote:
Originally Posted by Zetsubo View Post
Since I am no economist: I have some misconceptions I want to clear up.

1. How is it possible to create "Financial Products" that have no basis on tangible goods or services ?

2. Could someone explain the concept of "Futures contract" and why is this a "good thing" ?

I am asking these questions because it seems to me that alot of people are getting wealthy from simply moving around money in a short space of time. Whether through the stock market or some other financial institutions "products"
1. Financial Products are basically IOUs.
eg: If I borrow a thousand dollars from you, and promise to pay you $50 a month for two years, it becomes an IOU. The "promise to pay" is worth $1200 in total.

Now, what if you don't want to wait two years to get your money back? You sell the IOU to a broker for $1100. You get a hundred bucks profit and no need to wait. The broker then package the IOU with many others like it, and then trade that IOU to a retirement fund or a charity for $1150. (Retirement funds and charities don't mind the fact that money will take a long time to be recovered; they got time to wait.)

That's basically how the system works. The brokers make money by taking debt from people who don't want to wait to get their money back, and selling to someone who is willing to wait a long time to get the money.
(The main problem is that the people making loans realised they don't actually need to worry about being paid back. So they give loans to everyone and their dog, and sell the IOU before it goes bad. Subprime... you know the rest.)

2. Futures Contract is the right to buy/sell something at a certain price at a certain time. Invented by farmers who needed to protect themselves from crop price fluctuations. Having a Futures Contract means the farmer can guarantee that his crops would be sold at a price that's profitable. In many ways it is about fighting volatility.
HOWEVER, the Futures Contract could be bought and sold. This turns the contract into a gambling instrument; you are hoping that your contract would allow you to buy the farm produce cheaper than the market price, and thus pocket the difference.

It boils down to this; if something is worth money, and its price changes over time, then there is someone out there willing to trade them back and forth for a profit. But sometimes literal garbage is traded like it is worth something, and it is hard to tell the difference between garbage and financial instruments, because they are both IDENTICAL Paper.

Quote:
I don't think people should mix their "portfolios" in such a way that they "submerge high risk products" under the "high yield low risk products"

To me that is a contamination of the portfolio in the first place.

If the "bad product" fails... how do you isolate and extract its effects from the "good products"

Isn't this what caused the 08 crisis ?

Mixing bad debts with good debts ?
Bad debts pay more than good debts. But REALLY bad debts don't pay anything at all.

The problem is, the contamination of the portfolio is intentional. The people who mixes them don't actually want the good products isolated. The idea is that if they mixed them up enough, the people buying the stuff won't be able to tell that they are buying junk.

The only people who cared about buying good products, are those who are stuck with them; charities and retirement funds. The brokers and banks only care about selling everything they have at the highest price they can, without caring if they are actually any good.
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Old 2012-02-24, 10:22   Link #3025
monsta666
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Quote:
Originally Posted by Zetsubo View Post
Since I am no economist: I have some misconceptions I want to clear up.

1. How is it possible to create "Financial Products" that have no basis on tangible goods or services ?

2. Could someone explain the concept of "Futures contract" and why is this a "good thing" ?
In addition to what Vallen Chaos Valiant described I can add a few other examples:

1) What you described here are called derivatives. These are a complex financial instruments that are not directly connected to tangible goods or services. The derivatives has been a cause of concern because this market, before the financial crisis of 2008, expanded at a alarming rate.

The riskiest products in this where Credit Default Swaps (CDS) that you might off already heard of. Basically how these work is if you owned a bond (which is a type of loan) then you could insure that bond in case the company/country etc went bust so you wouldn't lose your money as you would gain money back from the CDS you bought. The value of the CDS is not actually directly connected to any tangible good although its price will be effected by the perceived value of the bond. If the bond comes from say Greece where most people think the country is broke and hence their bond is worthless then the price of the CDS will be high. In the case of Greece asking for a CDS for the country is a bit like asking to insure your car when you have crashed it three times in the last year.

The problem with CDS's is that unlike normal insurance you do not need to possess the product to get the insurance. There is no law saying that I must have the bond to get the CDS. In light of this predatory type behaviour has resulted where traders would attack a company or country by buying lots of CDS when it is in financial trouble. The flood of people getting CDS will put the company under more danger and encourage the bond holders to sell their bonds which puts the company in a even worse financial position which then encourages more CDS buying which encourages more bonds to be sold and so on. In other word the CDS can result in a death spiral. When the company goes bust all those CDS holders will get money back.

Other notable derivatives were the Collateralised Debt Obligations (CDO) and basically this is when the banks bundled mortgages together and solid those bundles to other investors so they could get good returns. Excessive lending in this product was one of the main reason for the sub-prime mortgages crash because too many banks were bundling all those bad loans into CDO's claiming they were risk free loans...

As to making high returns on low returning products. What many investors (and this includes pension funds which you could be investing in) do is they make highly leveraged bets. In other words for every dollar they invest they borrow about 10 dollars (or even more perhaps) on that bet. If that commodity or stock goes up by one dollar then they gain 10 back. This is how many hedge managers were able to make such big returns even though the basic products they were investing in had low returns of 1-2% per year. This is how many pension funds have to work, at least to some extent to make those 7-8% yearly returns.

Off course if things go bad then they can get really ugly but with a diverse enough portfolio then such risks can be managed especially if they invest in a diverse range of products or take hedges i.e. if the price of a stock goes beyond a certain threshold then they will automatically sell to eliminate further losses. A lot of this can also be done by computers so this trading can be performed at a very fast rate. This quick trading in mass can result in more market volatility however which kind of goes nicely with point 2 that you mentioned...

2.) Future markets are used by farmers for food commodities but it can also apply in other fields and operates under the same principle Vallen Chaos Valiant described. In the oil market end-users such as airline companies will buy oil future contracts to protect themselves against volatile oil prices. And when it comes to oil now is a particularly good time to buy futures contracts because due to the uncertain Iran situation airliners or other large purchasers of oil will want to buy at a stable price before any wild fluctuations take hold. Sometimes it is preferable to pay a slightly higher rate that is stable than a lower one that fluctuates wildly; the former allows for more long-term planning albeit at a cost. Mining companies may purchase futures contracts on other metal commodities for the same reason. Again though these contracts can be exchanged and people will want to make a buck by trying to predict the direction of the market. If the government wants to prevent excessive market volatility they could impose position limits which limits the size of bets that can be made or could make outright bans on what products could be sold.
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Old 2012-02-24, 14:19   Link #3026
Anh_Minh
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Quote:
Originally Posted by Vallen Chaos Valiant View Post
2. Futures Contract is the right to buy/sell something at a certain price at a certain time. Invented by farmers who needed to protect themselves from crop price fluctuations. Having a Futures Contract means the farmer can guarantee that his crops would be sold at a price that's profitable. In many ways it is about fighting volatility.
I think you're describing Forwards. Though I suppose the difference isn't that important.

Spoiler for futures:




Quote:
Originally Posted by Zetsubo View Post
Since I am no economist: I have some misconceptions I want to clear up.

1. How is it possible to create "Financial Products" that have no basis on tangible goods or services ?
As VCV explained, the subprimes were actually loans. Lot of loans, cut up and mixed like one makes sausages.


Quote:
2. Could someone explain the concept of "Futures contract" and why is this a "good thing" ?
Good for whom? They're meant to provide stability (you don't know what you gas bill in two months will be, but you know you'll be able to pay it), but they can be and, I suppose, are misused.

Quote:
I am asking these questions because it seems to me that alot of people are getting wealthy from simply moving around money in a short space of time. Whether through the stock market or some other financial institutions "products"

I am possible greatly undereducated in this matter... since to me one should only trade currency for physical goods made or actual services rendered (like getting a fee + interest for landing money to a company to build homes or even providing capital to insurance companies)

I don't think people should mix their "portfolios" in such a way that they "submerge high risk products" under the "high yield low risk products"
No free lunch. Generally speaking, low risk means low yield, or no one would ever deal in high risk.

Quote:
To me that is a contamination of the portfolio in the first place.

If the "bad product" fails... how do you isolate and extract its effects from the "good products"
It's not a bug, it's a feature. You don't know in advance what will fail (if you do, short sell the heck out of it, and then give me a percentage of the benefit for that kindly advice. ), but with a diversified portfolio, you're reasonably certain it won't all fail at the same time.


Quote:
Isn't this what caused the 08 crisis ?

Mixing bad debts with good debts ?
No, there are always some debts that'll be defaulted on. The problem is that "they" made some bad assumptions, and so badly miscalculated the risks they were taking.

I remember two things:
- First, some background. If you lend $1000 to a guy and you're 90% sure he'll repay you (let's forget the interest rates to simplify), you don't actually know what his IOU's worth. But if you lend $1000 to each of 10,000 guys, every one of whom is 90% sure to repay you, then you're really, really sure their IOUs are worth around 90% * 10,000 * 1000 = $9,000,000. (I'm using approximative terms 'cause I'm too lazy to calculate precisely). But that assumes those 10,000 guys are independent from each other. That one guy defaulting has no bearing on whether any of the other will default too. But imagine they're all workers in the same industry. How do you like your chances then? I mean, one of the risks you factored in to get "90%" is that guy losing his job because it's outsourced. But if that happens, it won't be just be to one guy. So your 10,000 IOUs look a lot riskier all of a sudden. Maybe you won't get $9,000,000 after all.
And that's what happened: they hadn't figured on all those people defaulting at the same time, despite all of them being poor Americans living in the same economy. They weren't all working in the same factory that got outsourced, but they might as well have.

- When calculating risk, they also take into account what they get in case of default. If they lend $200,000 to someone, and figure that, after expenses, they'll get $190,000 out of the sale of his repossessed house in case of default, then they only risk losing $10,000, right? And at the time those loans were made and sold, houses were worth a lot. I mean, there were all those suckers who easily got loans and bought houses, and that drove the prices up. Supply and demand. IIRC, that remained true right up until the crisis hit. And then, the loans dried up, houses were auctioned off right and left with no one who could afford to buy them... So, again, supply and demand - whoever owned the loans (and it wasn't always obvious who that was, thus adding to the chaos) lost a lot more than they expected just from that.

And then of course, there was the chain reaction - financial institutions counted on those loans getting repaid to fulfill their own obligations. But that's another subject.

Last edited by Anh_Minh; 2012-02-24 at 14:57.
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Old 2012-02-24, 23:32   Link #3027
Ithekro
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Quote:
In an election year dominated by battles over health care mandates, tax rates, and rising gasoline prices, it’s the mechanics of voting – and who’ll get to vote in November – that’s getting full-time attention from state legislators, election lawyers, and judges.

In the latest example, the Virginia state Senate is headed for a vote Friday on a new voter identification requirement – one more indication that the voter ID controversy will keep boiling in legislatures and in the courts right up to Election Day.

These new voter ID laws are being proposed almost exclusively by Republican legislators and governors in states throughout the nation, spawning both litigation and angry rhetoric from Democrats.

“All of a sudden after the 2008 election, these (voter ID laws) miraculously appear,” said Rep. Frederica Wilson, D- Fla. at a recent anti-voter ID event at the Capitol. “Why? Because we have a black president in the White House and it is to stop all of the people of color from … coming out to vote, because they (the proponents of voter ID laws) know who they are targeting …"


And it goes on from there.

Am I missing something? While I don't recall having to show ID at the polls in California, you are required to turn in your notice/absentee card to where your polling place is when you vote. If you don't have one you don't vote because they have you on their list and you sign so they know you voted. I don't think you have to be more than an "X" or even a stamp, just so that no person on their list votes twice. If you don't have one it is assumed you sent it in for absentee voting.

At least that is what I see when I go to the polls.
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Old 2012-02-25, 00:18   Link #3028
ganbaru
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Join Date: Dec 2007
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Culture wars may weaken youth support for Republicans
http://www.reuters.com/article/2012/...81N1FO20120224

A banking strategy that pleases no one
http://blogs.reuters.com/bethany-mcl...leases-no-one/
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Old 2012-02-25, 14:29   Link #3029
MrTerrorist
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Well i just watched these videos explaining about the Electoral College, how they work and the problem with it.


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Old 2012-02-25, 18:26   Link #3030
SaintessHeart
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9gag seems to enjoy insulting Americans lately :

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When three puppygirls named after pastries are on top of each other, it is called Eclair a'la menthe et Biscotti aux fraises avec beaucoup de Ricotta sur le dessus.
Most of all, you have to be disciplined and you have to save, even if you hate our current financial system. Because if you don't save, then you're guaranteed to end up with nothing.
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Old 2012-02-25, 18:54   Link #3031
Dhomochevsky
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Well, to be fair 'omg our economy will collapse due to gas prices' comes off a bit whiny, when basicly every other country in the world somehow manages with about twice that pricetag...
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Old 2012-02-25, 19:00   Link #3032
limao
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Quote:
Originally Posted by SaintessHeart View Post
9gag seems to enjoy insulting Americans lately :

I knew something in my life wasn't right: My ferrari is not red enough !!!!
Shhh...where did i put that million I used as ball to play tennis yesterday!! MUST FIX MY LIFE
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Old 2012-02-25, 19:17   Link #3033
Mr. DJ
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Originally Posted by SaintessHeart View Post
9gag seems to enjoy insulting Americans lately
that's business as usual on 4chan, trolls trolling trolls, reverse trolling, all that fun stuff
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Old 2012-02-25, 19:20   Link #3034
SaintessHeart
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Talking about oil :

U.S. stock indexes face crude oil’s rise
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When three puppygirls named after pastries are on top of each other, it is called Eclair a'la menthe et Biscotti aux fraises avec beaucoup de Ricotta sur le dessus.
Most of all, you have to be disciplined and you have to save, even if you hate our current financial system. Because if you don't save, then you're guaranteed to end up with nothing.
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Old 2012-02-25, 20:08   Link #3035
Vexx
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Yet another reason the XL Pipeline is *at best* very questionable and mostly both a landgrab by a foreign company, not a provider of long term jobs, and mostly a solution looking for a problem. Mostly a pile of money for a few oil barons.

http://www.npr.org/2012/02/25/147413...n-energy-fight

The hilarity of gas prices.. yeah its gone up 20 cents in a week or two.... welcome to speculative futures trading with little regulation/oversight. Its *still* cheaper than it was (does no one remember $4/gallon) and its still cheaper than the cost most of the world pays. We also pay nearly the least taxes on it as consumers.
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Old 2012-02-25, 20:19   Link #3036
SaintessHeart
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Quote:
Originally Posted by Vexx View Post
Yet another reason the XL Pipeline is *at best* very questionable and mostly both a landgrab by a foreign company, not a provider of long term jobs, and mostly a solution looking for a problem. Mostly a pile of money for a few oil barons.

http://www.npr.org/2012/02/25/147413...n-energy-fight

The hilarity of gas prices.. yeah its gone up 20 cents in a week or two.... welcome to speculative futures trading with little regulation/oversight. Its *still* cheaper than it was (does no one remember $4/gallon) and its still cheaper than the cost most of the world pays. We also pay nearly the least taxes on it as consumers.
The real problem with futures trading, IMO, are the "investment arms" of banks who enjoy pouring your savings into these stuff, only to dump them later for a profit, instead of buying to actually own the goods.

Even the small-time traders are irritated. The price action is so bloody fast that you can lost a few thousand on just a handful of contracts you plan to dump in 10s.....utter insanity.
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When three puppygirls named after pastries are on top of each other, it is called Eclair a'la menthe et Biscotti aux fraises avec beaucoup de Ricotta sur le dessus.
Most of all, you have to be disciplined and you have to save, even if you hate our current financial system. Because if you don't save, then you're guaranteed to end up with nothing.
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Old 2012-02-25, 20:39   Link #3037
Frenchie
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Yeah America gets the best prices on gas, and given the almost flawless parity of the Australian dollar and the American dollar, I just felt like addressing this. I paid $5.77/gallon (Adjusted from the /liter we have here in OZ) last I was at the pump.

Have a look at the following link.

Link to purchasing power comparisons by country.

I think a (Great) number of Americans could do with a bit of perspective.

My uncle lives in LA and he regularly balks at the price of life (for a comparable standard of living) here in Australia.
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Old 2012-02-25, 20:53   Link #3038
Mr. DJ
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Quote:
Originally Posted by Frenchie View Post
Yeah America gets the best prices on gas, and given the almost flawless parity of the Australian dollar and the American dollar, I just felt like addressing this. I paid $5.77/gallon (Adjusted from the /liter we have here in OZ) last I was at the pump.

Have a look at the following link.

Link to purchasing power comparisons by country.

I think a (Great) number of Americans could do with a bit of perspective.

My uncle lives in LA and he regularly balks at the price of life (for a comparable standard of living) here in Australia.
Some people can't/won't look at the bigger picture because it's not America and just rather blame Obama for everything...it saddens me when I have a friend like that.

holy crap Switzerland O.O
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Old 2012-02-25, 21:00   Link #3039
monsta666
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Quote:
Originally Posted by Dhomochevsky View Post
Well, to be fair 'omg our economy will collapse due to gas prices' comes off a bit whiny, when basicly every other country in the world somehow manages with about twice that pricetag...
Yes for a European it can be hard to fathom why the Americans are complaining when the price of petrol is twice as much here. The price of unleaded petrol in the UK for example is about £1.40 a litre ($2.24 a litre) which equates to almost $9 a gallon. But to put this in a wider context I believe the average American consumes twice as much energy as the average European/Japanese so they will be more sensitive to prices changes. In effect due to consumption patterns petrol that is half as expensive will hurt them as much as $9 gas does to us.

Quote:
Originally Posted by SaintessHeart View Post
Yes WTI crude oil is currently priced at about $110 a barrel but it is even worse for some American consumers and all Europeans because they have to buy brent oil which as of Friday traded at just above $125. Currently the price of oil for Europe is above the year high from the Arab springs due to the weaker Euro but it is very possible this price can be exceeded in absolute terms next week as the 12 month high was around $127. Since a lot of Americans from the coastal areas have to buy brent oil which is more expensive than WTI crude oil this partly explains why those regions are paying more for a gallon of gas than people in the mid-west who get to buy more WTI crude oil. In addition to that the mid-west also has a relative glut of oil due to more oil coming from North Dakota and the Canadian tar sands. Those oil sources do not enter the world market so they do not command as high prices at least not yet anyway (maybe the Canadian government/company will change that somewhat by pushing the Keystone pipeline to be built or cutting a deal with the Chinese).

I think for oil prices it is effected by three factors. Global oil production for crude oil has largely stagnated since about 2006 so this is driving the price up. With production stagnating and global net exports declining what we have is a zero sum game and it would seem developing countries such as China/India are the main price setters for oil. However to me that is not the whole story and there is effect of speculation that is driving the price up. This is particularly true now due to the Iran situation. Although we must remember that speculation can occur in both directions; people can short the price of oil if they perceive it is too high and indeed some people did just that in 2008 when the price sky-rocketed.

Speaking of 2008, that leads to the final point on why oil prices have been driven up since about 2008. The central banks of major economies in the US and Europe have been printing extraordinary amounts of cash. That cash - which goes to many of the major banks/corporations - is then invested in various areas and that is causing some asset inflation. I believe this extra cash is making it's way into other areas apart from oil and this extra cash is partly responsible for the increase in value of various indexes such as the Dow Jones, FTSE 100 etc. Another reason to support this view is traditionally it takes about 17 barrels of oil to buy an ounce of gold. Look at the gold prices and you will see the current price is at $1,775 a ounce. Which fits the historical ratio. That would suggest that part of the reason for these expensive prices is due to a weak dollar. But I am soft pedalling this; I am just making observations feel free to take what you want from this...
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Old 2012-02-25, 22:23   Link #3040
Vallen Chaos Valiant
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Join Date: Nov 2004
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I just want to say, that with the US petrol tax being as low as it could go already, the only way Obama could lower the price of petrol is if he subsidises gasoline for the ENTIRE PLANET.

As in, any attempt to make US gasoline cheaper would just cause a net flow of oil to other countries where they could fetch a better price. That's how markets work; highest bidder. And as an earlier graph I posted showed, the average price of petrol before-tax is pretty much the same world wide.

Logically then, the only way the POTUS could lower the price of petrol, is by lowering the price for everyone on Earth, at the same time.

Now, I would certainly welcome that, but anyone can tell you it isn't possible. America haven't got that kind of money, no one does.

Republicans, of course, would like to pretend they could do it. Or at least pretend that Obama could but isn't.
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