Thursday, July 22, 2010

Goldman Sachs et al. The next bubble: Carbon trading! Banks win, humanity loses, again.

Still harping on Goldman-Sachs. Yeah, I am on a roll. So, just roll along with me.

Think of this as a continuation of yesterday's post, which actually began with this post, where we looked at the roll played by Goldman-Sachs in the commodities bubble resulting in massive global starvation and running the bank of Canada etc., etc., etc.....

So let's move along to the next great bubble- Bubble # 6- Global Warming- sure to cause misery and impoverishment on a massive scale.

Barack Obama, a popular young politician whose leading private campaign donor was an investment bank called Goldman Sachs is in the oval office. Gone are Hank Paulson and Neel Kashkari; in their place are Treasury chief of staff (remember this name) Mark Patterson and CFTC chief Gary Gensler, both former Goldmanites.

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 groundbreaking new commodities bubble, disguised as an "environmental plan," called cap-and-trade.

Here follows a simple explanation of the carbon credit market-

-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.

And the bonus in all of this to the scum banksters?

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.

Besides the guaranteed increase in prices due to an ever lowering cap on carbon credits set by the government, there is another bonus to this new bubble!

The same Wall Street players that upended the economy are clamoring to open up a massive market to swap, chop, and bundle carbon derivatives. Sound familiar?
Could Cap and Trade Cause Another Market Meltdown?

The answer is a resounding and definite YES, as is intended!

"If the Waxman-Markey climate bill is signed into law, it will generate, almost as an afterthought, a new market for carbon derivatives. That market will be vast, complicated, and dauntingly difficult to monitor. And if Washington doesn't get the rules right, it will be vulnerable to speculation and manipulation by the very same players who brought us the financial meltdown.

Washington has no intention of "getting the rules right", except for the Wall St banksters.
They will do nothing to prevent speculation, manipulation or financial meltdown, as this is exactly the fuel that feeds the Wall Street fires.

How big could this bubble get?

Cap and trade would create what Commodity Futures Trading commissioner Bart Chilton anticipates as a $2 trillion market, "the biggest of any [commodities] derivatives product in the next five years."

The volume of this new market will be upwards of a trillion dollars annually
Trillions annually?

"We are on the verge of creating a new trillion-dollar market in financial assets that will be securitized, derivatized, and speculated by Wall Street like the mortgage-backed securities market," says Robert Shapiro

Housing bubble, commodity bubble- redux.
The fall-out will rain all over the common man, the lowly taxpayer.

Banks like JPMorgan Chase, Morgan Stanley, and Goldman Sachs already have active carbon trading desks that deal in instruments connected to Europe's cap-and-trade system and voluntary markets here. But business will explode if a cap-and-trade system becomes law. So it's no surprise that the financial industry has taken an intense interest in the fine print of the Waxman-Markey bill.

Of course, the financial industry has lobbyists to help with this.
A group mentioned in the Mother Jones article is the International Swaps and Derivatives Association

Here is a list of their primary members. Here is a list of their associate membership.
This is one group intensely interested in this supposed 'save the earth' cap and trade legislation.
Who do you see there?

Already, the industry has achieved its main objective: The Waxman-Markey bill would create a big, convoluted market for carbon derivatives.
An an especially audacious move, the industry also argued that cap and trade should allow the very same types of unregulated instruments that helped spread risk throughout the financial system like a cancer, contributing to the economic meltdown. In particular, it lobbied for "over the counter" carbon derivatives—deals conducted directly between two parties with no one monitoring the risk. (though this had a temporary set back, the article goes on to say)
The lobbying battle is not over. Chilton, the CFTC commissioner, praised Stupak's 11th-hour amendment, but expressed concern that it could be removed in the legislative process ahead.

A warning for the Obama administration, which will go unheeded comes from the EU

This January, an executive from the French energy giant EDF warned that carbon trading was in danger of becoming "a new type of subprime tool which will be diverted from what is its initial purpose: to encourage real investment in real low-carbon technology."

I argue that carbon trading was never designed to encourage any real change, any real investment in new technologies. Carbon trading was encouraged, was lobbied for to create the next big bubble.
Bubbles are what has been keeping the economy going for some time now. It creates an illusion for the masses, suckers them in to believing all is well and allows the banksters to pick the pockets of the people.

Where does Goldman Sachs fit into this picture?

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.
Can you believe it? Mark Patterson, now Treasury chief of staff, for the Obama administration, was just 5 years ago a lobbyists for cap and trade on behalf of Goldman-Sachs!

I am shocked I tell you, shocked!!

The casino is ready to rake it in. The taxpayer will bail the mess out, again.
This ends my Goldman-Sachs, scum banksters posts. Temporarily of course!

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