If we've learned anything from recent debacles, I suppose, it is to keep a close eye on Wall Street boys..
Following was edited. Credit goes to Matt Taibbi/Rolling Stone.
Having seamlessly navigated the political minefield of the bailout era, Goldman is once again back to its old business, scouting out loopholes in a new government-created market with the aid of a new set of alumni occupying key government jobs.
Gone are Hank Paulson and Neel Kashkari; in their place arc Treasury chief of staff Mark Patterson and CFTC chief Gary Gensler, both former Goldmanites. (Gensler was the firm's co-head of finance.) And instead of credit derivatives or oil futures or mortgage-backed CDOs, the new game in town, the next bubble, is in carbon credits - a booming trillion dollar market that barely even exists yet, but will if the Democratic Party that it gave $4,452,585 to in the last election manages to push into existence a ground breaking new commodities bubble, disguised as an "environmental plan," called cap-and-trade.
The new carbon-credit market is a virtual repeat of the commodities-market casino that's been kind to Goldman, except it has one delicious new wrinkle: If the plan goes forward as expected, the rise in prices will be government-mandated. Goldman won't even have to rig the game. It will be rigged in advance.
Here's how it works: If the bill passes, there will be limits for coal plants, utilities, natural-gas distributors and numerous other industries on the amount of carbon emissions (a.k.a. greenhouse gases) they can produce per year. If the companies go over their allotment, they will be able to buy "allocations" or credits from other companies that have managed to produce fewer emissions. President Obama conservatively estimated that about $646 billion worth of carbon credits will be auctioned in the first seven years; one of his top economic aides speculates that the real number might be twice or even three times that amount.
The feature of this plan that has special appeal to speculators is that the "cap" on carbon will be continually lowered by the government, which means that carbon credits will become more and more scarce with each passing year. Which means that this is a brand-new commodities market where the main commodity to be traded is guaranteed to rise in price over time. The volume of this new market will be upwards of a trillion dollars annually for comparison's sake, the annual combined revenues of all electricity suppliers in the U.S. total $320 billion.
Goldman wants this bill. The plan is (1) to get in on the ground floor of paradigm shifting legislation, (2) make sure that they're the profit-making slice of that paradigm and (3) make sure the slice is a big slice. Goldman started pushing hard for cap-and-trade long ago, but things really ramped up last year when the firm spent $3.5 million to lobby climate issues. (One of their lobbyists at the time was none other than Patterson, now Treasury chief of staff.) Back in 2005, when Hank Paulson was chief of Goldman, he personally helped author the bank's environmental policy, a document that contains some surprising elements for a firm that in all other areas has been consistently opposed to any sort of government regulation.
Paulson's report argued that "voluntary action alone cannot solve the climate-change problem." Few years later, the bank's carbon chief, Ken Newcombe, insisted that cap-and-trade alone won't be enough to fix the climate problem and called for further public investments in research and development. Which is convenient, considering that Goldman made early investments in wind power (it bought a subsidiary called Horizon Wind Energy), renewable diesel (it is an investor in a firm called Changing World Technologies) and solar power (it partnered with BP Solar), exactly the kind of deals that will prosper if the government forces energy producers to use cleaner energy. As Paulson said at the time, "We're not making those investments to lose money."
The bank owns a 10 percent stake in carbon credits will be traded. Moreover, Goldman owns a minority stake in Blue Source LLC, a Utah-based firm that sells carbon credits of the type that will be in great demand if the bill passes. Nobel Prize winner AI Gore, who is intimately involved with the planning of cap-and-trade, started up a company called Generation Investment Management with three former bigwigs from Goldman Sachs Asset Management, David Blood, Mark Ferguson and Peter Hanis. Their business? Investing in carbon offsets, There's also a $500 million Green Growth Fund set up by a Goldmanite to invest in green-tech...the list goes on and on. Goldman is ahead of the headlines again, just waiting for someone to make it rain in the right spot. Will this market be bigger than the energy-futures market?
"Oh, it'll dwarf it," says a former staffer on the House energy committee.
Well, you might say, who cares? If cap-and-trade succeeds, won't we all be saved from the catastrophe of global warming? Maybe but cap-and-trade, as envisioned by Goldman, is really just a carbon tax structured so that private interests collect the revenues. Instead of simply imposing a fixed government levy on carbon pollution and forcing unclean energy producers to pay for the mess they make, cap and trade will allow a small tribe of greedy-as-hell Wall Street swine to turn yet another commodities market into a private tax-collection scheme. This is worse than the bailout: It allows the bank to seize taxpayer money before it's even collected.
"If it's going to be a tax, I would prefer that Washington set the tax and collect it," says Michael Masters, the hedge fund director who spoke out against oil-futures speculation. "But we're saying that Wall Street can set the tax, and Wall Street can collect the tax. That's the last thing in the world I want, It's just asinine."
Cap-and-trade is going to happen. Or, if it doesn't, something like it will. The moral is the same as for all the other bubbles that Goldman helped create, from 1929 to 2009. In almost every case, the very same bank that behaved recklessly for years, weighing down the system with toxic loans and predatory debt, and accomplishing nothing but massive bonuses for a few bosses, has been rewarded with mountains of virtually free money and government guarantees - while the actual victims in this mess, ordinary taxpayers, are the ones paying tor it.
It's not always easy to accept the reality of what we now routinely allow these people to get away with; there's a kind of collective denial that kicks in when a country goes through what America has gone though lately, when a people lose as much prestige and status as we have in the past few years. You can't really register the fact that you're no longer a citizen of a thriving first-world democracy, that you're no longer above getting robbed in broad daylight, because like an amputee, you can still sort of feel things that are no longer there.
But this is it. This is the world we live in now. And in this world, some of us have to play by the rules, while others get a note from the principal excusing them from homework till the end of time, plus 10 billion free dollars in a paper bag to buy lunch. It's a gangster state, running on gangster economics, and even prices can't be trusted anymore; there are hidden taxes in every buck you pay. And maybe we can't stop it, but we should at least know where it's all going.
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Fraudulent and corrupt practices are expected to swallow a whopping $500 billion out of $5 trillion stimulus fundings by governments worldwide, a global report has said.
According to global risk consultancy Kroll's latest edition of Global Fraud Report, government stimulus funding worldwide aggregating $5 trillion has introduced new opportunities for fraud and corruption worldwide.
Though governments are likely to struggle to keep the losses through corruption down, it would "still provide a staggering pot of $500 billion in corrupt gains," the report stated.
Citing data from Transparency International, the global coalition against corruption, the report stated that it has put into perspective the heightened risk brought on by the financial crisis.
"According to the coalition, corruption can raise procurement contract costs by at least 10 per cent in a stable economy – an equivalent of $500 billion in corrupt gains," the Kroll report stated.
Interestingly, in emergency situations these costs can rise as high as 30 per cent of the overall cost of the contract, it added.
Bankgeek said:The world could use a new mini ice age right about now. Temperatures have declined recently, so be careful what you wish for.
In the 1970's, the mainstream media fueled the global cooling hysteria, and scared the public with threats of an impending ice age.
If we were facing "global cooling" instead of "global warming" right now, the politicians and their campaign donors would be developing a market for carbon subsidies instead of carbon taxes.
The problem lies with economic meddling from those who wish to seek re-election or live large off of government pork, not the specific item which prompted the meddling.
Most of the global warming skeptics agree global warming is real, and it is likely caused by human activities of burning Fossil fuel. They mostly argue it is better to not engage in costly efforts to curb emissions; instead, spend the money is areas with more bang for the buck, such as health care, education, etc. As an example, they are saying it is far more cost effective to reallocate the pacific islanders when their islands are submerged by rising sea level than curbing CO2 emission to stop the sea level from rising. I find this argument much harder to ignore than the outright denials based on ignorance.
Edit to Add: don't confuse right or wrong with what you like or not like people.
nycll said:Most of the global warming skeptics agree global warming is real, and it is likely caused by human activities of burning Fossil fuel. They mostly argue it is better to not engage in costly efforts to curb emissions; instead, spend the money is areas with more bang for the buck, such as health care, education, etc. As an example, they are saying it is far more cost effective to reallocate the pacific islanders when their islands are submerged by rising sea level than curbing CO2 emission to stop the sea level from rising. I find this argument much harder to ignore than the outright denials based on ignorance.
All this will do is drive up the cost of doing business from those businesses that need to emit CO2. Those that can stay in business (power generation) will raise prices. Those that can't (manufacturing) will go out of business and the manufacturing will be moved to countries without this onerous legislation (ie: China).
It doesn't take an economic genius to figure this out.
LeveragedSpeculator said:nycll said:Most of the global warming skeptics agree global warming is real, and it is likely caused by human activities of burning Fossil fuel. They mostly argue it is better to not engage in costly efforts to curb emissions; instead, spend the money is areas with more bang for the buck, such as health care, education, etc. As an example, they are saying it is far more cost effective to reallocate the pacific islanders when their islands are submerged by rising sea level than curbing CO2 emission to stop the sea level from rising. I find this argument much harder to ignore than the outright denials based on ignorance.
All this will do is drive up the cost of doing business from those businesses that need to emit CO2. Those that can stay in business (power generation) will raise prices. Those that can't (manufacturing) will go out of business and the manufacturing will be moved to countries without this onerous legislation (ie: China).
It doesn't take an economic genius to figure this out.
Edited by Moderator: Edited political commentNote I said I found it harder to ignore but i didn't say i agreed with the skeptics, either. The climate change proponents are using a risk management argument. They say there are unknown and potentially devastating risks associated higher temperature , rising sea levels, etc. They are saying the risk is worth the cost to hedge against. It is a sound argument too.
As to your concern of raising prices, I read that 85% of the carbon permits are going to be given out for free to incumbent emission producers, like the existing coal power generator. It seems to be a big ado about nothing. Maybe it is just a show to coerce China to join the climate control treaty.
nycll said:Most of the global warming skeptics agree global warming is real, and it is likely caused by human activities of burning Fossil fuel. They mostly argue it is better to not engage in costly efforts to curb emissions; instead, spend the money is areas with more bang for the buck, such as health care, education, etc. As an example, they are saying it is far more cost effective to reallocate the pacific islanders when their islands are submerged by rising sea level than curbing CO2 emission to stop the sea level from rising. I find this argument much harder to ignore than the outright denials based on ignorance. By definition, a global warming skeptic does not agree global warming is real (he is skeptical of that claim). I will admit there is likely a very small signal to noise ratio from that crowd (as they have a lot of data/work to discredit). There is another, much larger, group in the scientific community who are skeptical with Anthropogenic Global Warming (usually referring to atmospheric CO2 in particular). I myself am skeptical that CO2 is the primary driver of the last 30 years of warming. Most of these skeptics online seem to favor solar forcing as a primary driver (I'm slightly more skeptical of that than CO2). Anyway, I haven't spent the considerable time and effort necessary to come to my own conclusions, but I have seen some of the linearized models employed and been disappointed: if anything needs to be treated like a dynamical control system it's long term climate models. Unfortunately even if you do attempt to complicate the complex by another order of magnitude you'll probably get nothing for it because there are millions of sets of equations that will adequately model the past temperature data given the past inputs we know (and making assumptions about those we don't) even if you assume your input and temp data is perfect. Add to that small errors introduced early in said inputs or temps and your model is WAY off.
As for your skeptics, whom seemingly are skeptical of the economic measures being proposed in political communities, I certainly agree that the measures are wrongheaded. But the economic damage won't be in moving Pacific Islanders (they will be expected to move themselves a bit inland over the next hundred years to accomodate 7-23in), but (potentially) increases in tropical storms, more severe droughts and heat spells, increased flooding, as well as expensive solutions for places like London, New Orleans, etc.
All this will do is drive up the cost of doing business from those businesses that need to emit CO2. Those that can stay in business (power generation) will raise prices. Those that can't (manufacturing) will go out of business and the manufacturing will be moved to countries without this onerous legislation (ie: China).
It doesn't take an economic genius to figure this out. Edited by Moderator: Edited political comment
We in the West are fortunate enough to have economies and incomes sufficient to permit discussion of job-killing legislation of this magnitude.
Elsewhere on the planet, there are billions of people below our standard of living, who can't wait for our cuts in demand to reduce prices for Fossil fuels, and further their own efforts at industrialization. Poorer nations have no problem emitting limitless amounts of carbon if it is the difference between progress and perpetuation of misery. OPEC and other exporters will have no problem meeting that need.
So, in the end, reductions in our demand depress prices, stimulating demand elsewhere, netting little improvement to the global CO2 levels. All we do is kill domestic jobs.
History has shown us that the best way to eliminate technology with undesired effects is for market forces to render it obsolete. When better technology exists, consumers will adapt.
Of course, replacing foreign oil with greatly expanded drilling programs for domestic oil, and funneling all royalties to development of cleaner technologies, is impossible thanks to the many special interest groups who are so completely dissociated from those who will lose their jobs as this legislation puts the brakes on an already weakened US economy. Thanks to lobbyists, Americans seeking relief from high prices, massive trade deficits, and a lack of jobs hold little sway over politicians.
Such common sense has no place in Washington. Instead, Americans will sit idle as Middle Eastern sheiks continue raking in tens of billions, and our government will borrow even more money from China, whose surpluses come from the very behavior our government seeks to stop, to be wasted on boondoggles that do little to solve the problem.
nycll said:LeveragedSpeculator said:nycll said:Most of the global warming skeptics agree global warming is real, and it is likely caused by human activities of burning Fossil fuel. They mostly argue it is better to not engage in costly efforts to curb emissions; instead, spend the money is areas with more bang for the buck, such as health care, education, etc. As an example, they are saying it is far more cost effective to reallocate the pacific islanders when their islands are submerged by rising sea level than curbing CO2 emission to stop the sea level from rising. I find this argument much harder to ignore than the outright denials based on ignorance.
All this will do is drive up the cost of doing business from those businesses that need to emit CO2. Those that can stay in business (power generation) will raise prices. Those that can't (manufacturing) will go out of business and the manufacturing will be moved to countries without this onerous legislation (ie: China).
It doesn't take an economic genius to figure this out. Edited by Moderator: Edited political commentNote I said I found it harder to ignore but i didn't say i agreed with the skeptics, either. The climate change proponents are using a risk management argument. They say there are unknown and potentially devastating risks associated higher temperature , rising sea levels, etc. They are saying the risk is worth the cost to hedge against. It is a sound argument too.
As to your concern of raising prices, I read that 85% of the carbon permits are going to be given out for free to incumbent emission producers, like the existing coal power generator. It seems to be a big ado about nothing. Maybe it is just a show to coerce China to join the climate control treaty.
Problem is that any carbon credit system, that is not global in scale simply moves the carbon emissions from one country to another. So it really isn't about managing risk in any meaningful way, it is about moving carbon heavy industries like manufacturing offshore.
Instead of figuring out ways to handicap the US economy maybe we should be focusing on becoming more competitive.
nycll said:Most of the global warming skeptics agree global warming is real, and it is likely caused by human activities of burning Fossil fuel.
B.S. Global warming skeptics agree that warming is real - they do not agree it is human activities that are causing it. That big fireball in the sky comes to mind.
"Ours is not to ask why, ours to sell and to buy". Heard on NYSE Floor 10/18/1987. ..My guess is GS is not concerned with Global Warming argument, but how to profit from it.
nycll said:LeveragedSpeculator said:nycll said:Most of the global warming skeptics agree global warming is real, and it is likely caused by human activities of burning Fossil fuel. They mostly argue it is better to not engage in costly efforts to curb emissions; instead, spend the money is areas with more bang for the buck, such as health care, education, etc. As an example, they are saying it is far more cost effective to reallocate the pacific islanders when their islands are submerged by rising sea level than curbing CO2 emission to stop the sea level from rising. I find this argument much harder to ignore than the outright denials based on ignorance.
All this will do is drive up the cost of doing business from those businesses that need to emit CO2. Those that can stay in business (power generation) will raise prices. Those that can't (manufacturing) will go out of business and the manufacturing will be moved to countries without this onerous legislation (ie: China).
It doesn't take an economic genius to figure this out. Edited by Moderator: Edited out political commentNote I said I found it harder to ignore but i didn't say i agreed with the skeptics, either. The climate change proponents are using a risk management argument. They say there are unknown and potentially devastating risks associated higher temperature , rising sea levels, etc. They are saying the risk is worth the cost to hedge against. It is a sound argument too.
As to your concern of raising prices, I read that 85% of the carbon permits are going to be given out for free to incumbent emission producers, like the existing coal power generator. It seems to be a big ado about nothing. Maybe it is just a show to coerce China to join the climate control treaty.
A sound argument for China? You overlook the most glaring point about this is that it is not global in scope. IE: other countries will not jump on any bandwagon to cut emissions. Even if it doesn't result in raising electricity prices (it will with coal generated kwh's for measurement), it will still force more manufacturers overseas and set up additional barriers to US manufacturing.
This will raise prices and further hobble the US economy, which is contracting at a rapid clip.
Dumb leftist Americans don't understand economics. All this will do is drive up the cost of doing business from those businesses that need to emit CO2. Those that can stay in business (power generation) will raise prices. Those that can't (manufacturing) will go out of business and the manufacturing will be moved to countries without this onerous legislation (ie: China).
It doesn't take an economic genius to figure this out.
We in the West are fortunate enough to have economies and incomes sufficient to permit discussion of job-killing legislation of this magnitude.
Elsewhere on the planet, there are billions of people below our standard of living, who can't wait for our cuts in demand to reduce prices for Fossil fuels, and further their own efforts at industrialization. Poorer nations have no problem emitting limitless amounts of carbon if it is the difference between progress and perpetuation of misery. OPEC and other exporters will have no problem meeting that need.
So, in the end, reductions in our demand depress prices, stimulating demand elsewhere, netting little improvement to the global CO2 levels. All we do is kill domestic jobs.
History has shown us that the best way to eliminate technology with undesired effects is for market forces to render it obsolete. When better technology exists, consumers will adapt.
Of course, replacing foreign oil with greatly expanded drilling programs for domestic oil, and funneling all royalties to development of cleaner technologies, is impossible thanks to the many special interest groups who are so completely dissociated from those who will lose their jobs as this legislation puts the brakes on an already weakened US economy. Thanks to lobbyists, Americans seeking relief from high prices, massive trade deficits, and a lack of jobs hold little sway over politicians.
Such common sense has no place in Washington. Instead, Americans will sit idle as Middle Eastern sheiks continue raking in tens of billions, and our government will borrow even more money from China, whose surpluses come from the very behavior our government seeks to stop, to be wasted on boondoggles that do little to solve the problem.You could've saved several paragraphs with "Drill baby Drill". Drilling every square inch of the U.S. won't satisfy our gluttonous oil thirst.
Your economics on our reduction in demand automatically stimulating demand elsewhere is shaky. Is that your economic concept, or did you get it from someone else? Certainly have never seen that from anyone of reasonable repute. Oil dropped by two-thirds this year; what massive industrialization did that cause?
We are the ones to create alternatives; others will follow. That's the way it has worked with every significant technology for the last 100+ years. And I'm talking China, India and Russia -- those are the ones that will make or break the world's environment. Sorry, but if all the Ethiopias in the world burn oil to industrialize, it's not going to be at a big enough scale to cause massive environmental danger, such as China, India, and ourselves are currently doing.
geebeebee said: We are the ones to create alternatives; others will follow. That's the way it has worked with every significant technology for the last 100+ years. And I'm talking China, India and Russia -- those are the ones that will make or break the world's environment. Sorry, but if all the Ethiopias in the world burn oil to industrialize, it's not going to be at a big enough scale to cause massive environmental danger, such as China, India, and ourselves are currently doing.
The way it has worked the past 100+ years is someone innovates and finds someway to change the game. The difference is in the past this limit was naturally imposed (technology), whereas this limit is not technological but legislative (regulation). An aspiring entrepreneur would just find it easier and more cost effective to set up a manufacturing hub in Malaysia, for instance.
I'm not sure if you are very familiar with the manufacturing industries but its fairly easy to outsource even complicated manufacturing processes and products these days. Your support of this does not address that underlying issue of jobs destruction in the US manufacturing sector and increased costs.
Even if most other countries do jump on the bandwagon, it still won't solve the "problem."
Large exporters of Fossil fuels will not stop exporting, nor will every single country agree to cap their emissions. This scheme cannot succeed, as it requires complete cooperation from everybody at once.
International diplomats have tried this before. The War on Drugs failed, and right now, over 90% of the world's heroin is sourced from opium grown in Afghanistan, and over 75% of the world's cocaine is produced in Colombia. North Korea is the largest source of counterfeit US currency. Iran is proliferating weapons to terrorists. Nigerians run fraud rings of international reach. Sweden has become a haven for illegal filesharing.
When a problem has a truly global impact, everybody has to cooperate in order to stop it from proliferating. CO2 is even more insidious than many of the other trans-national problems. It crosses borders without smugglers, can't be arrested, can't be spied on, and has no servers that can be shut down.
The various proposals to block imports from countries which don't cooperate won't work either. Much as these carbon taxes will push down the exporter's prices of Fossil fuels, making them more attractive to countries seeking to industrialize, trade restrictions from the West will drive down the exporter's prices of manufactured goods, further driving consumption and development in places which formerly could not afford it.
Like it or not, Fossil fuels are a valuable resource, and where there exists value, somebody will come along to extract it. We can either continue fighting against those seeking to exploit value (even though such tactics almost always fail), or we can work to remove the value of Fossil fuels. Namely, by making them obsolete. Once inherently better technology comes along, at a better cost, Fossil fuels will be obsolete.
In the 19th century, large cities all over the world suffered many deaths due to fire and explosion from the natural gas used for lighting. That problem was solved by one man in a laboratory, not legions of government bureaucrats trying to regulate it out of existence.
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