Things are not always as they seem:
REH Top of Form Bottom of Form April 10, 2012 NYTimes The High Cost of Gambling on Oil By JOSEPH P. KENNEDY II Boston THE drastic rise in the price of oil and gasoline is in part the result of forces beyond our control: as high-growth countries like China and India increase the demand for petroleum, the price will go up. But there are factors contributing to the high price of oil that we can do something about. Chief among them is the effect of “pure” speculators — investors who buy and sell oil futures but never take physical possession of actual barrels of oil. These middlemen add little value and lots of cost as they bid up the price of oil in pursuit of financial gain. They should be banned from the world’s commodity exchanges, which could drive down the price of oil by as much as 40 percent and the price of gasoline by as much as $1 a gallon. Today, speculators dominate the trading of oil futures. According to Congressional testimony by the commodities specialist Michael W. Masters in 2009, the oil futures markets routinely trade more than one billion barrels of oil per day. Given that the entire world produces only around 85 million actual “wet” barrels a day, this means that more than 90 percent of trading involves speculators’ exchanging “paper” barrels with one another. Because of speculation, today’s oil prices of about $100 a barrel have become disconnected from the costs of extraction, which average $11 a barrel worldwide. Pure speculators account for as much as 40 percent of that high price, according to testimony that Rex Tillerson, the chief executive of ExxonMobil, gave to Congress last year. That estimate is bolstered by a recent report from the Federal Reserve Bank of St. Louis. Many economists contend that speculation on oil futures is a good thing, because it increases liquidity and better distributes risk, allowing refiners, producers, wholesalers and consumers (like airlines) to “hedge” their positions more efficiently, protecting themselves against unseen future shifts in the price of oil. But it’s one thing to have a trading system in which oil industry players place strategic bets on where prices will be months into the future; it’s another thing to have a system in which hedge funds and bankers pump billions of purely speculative dollars into commodity exchanges, chasing a limited number of barrels and driving up the price. The same concern explains why the United States government placed limits on pure speculators in grain exchanges after repeated manipulations of crop prices during the Great Depression. The market for oil futures differs from the markets for other commodities in the sheer size and scope of trading and in the impact it has on a strategically important resource. There is a fundamental difference between oil futures and, say, orange juice futures. If orange juice gets too pricey (perhaps because of a speculative bubble), we can easily switch to apple juice. The same does not hold with oil. Higher oil prices act like a choke-chain on the economy, dragging down profits for ordinary businesses and depressing investment. When I started buying and selling oil more than 30 years ago for my nonprofit organization, speculation wasn’t a significant aspect of the industry. But in 1991, just a few years after oil futures began trading on the New York Mercantile Exchange, Goldman Sachs made an argument to the Commodity Futures Trading Commission that Wall Street dealers who put down big bets on oil should be considered legitimate hedgers and granted an exemption from regulatory limits on their trades. The commission granted an exemption that ultimately allowed Goldman Sachs to process billions of dollars in speculative oil trades. Other exemptions followed. By 2008, eight investment banks accounted for 32 percent of the total oil futures market. According to a recent analysis by McClatchy, only about 30 percent of oil futures traders are actual oil industry participants. Congress was jolted into action when it learned of the full extent of Commodity Futures Trading Commission’s lax oversight. In the wake of the economic crisis, the Dodd-Frank Wall Street reform law required greater trading transparency and limited speculators who lacked a legitimate business-hedging purpose to positions of no greater than 25 percent of the futures market. This is an important step, but limiting speculators in the oil markets doesn’t go far enough. Even with the restrictions currently in place, those eight investment banks alone can severely inflate the price of oil. Federal legislation should bar pure oil speculators entirely from commodity exchanges in the United States. And the United States should use its clout to get European and Asian markets to follow its lead, chasing oil speculators from the world’s commodity markets. Eliminating pure speculation on oil futures is a question of fairness. The choice is between a world of hedge-fund traders who make enormous amounts of money at the expense of people who need to drive their cars and heat their homes, and a world where the fundamentals of life — food, housing, health care, education and energy — remain affordable for all. <http://topics.nytimes.com/topics/reference/timestopics/people/k/joseph_p_kennedy_ii/index.html> Joseph P. Kennedy II, a former United States representative from Massachusetts, is the founder, chairman and president of Citizens Energy Corporation. From: [email protected] [mailto:[email protected]] On Behalf Of Ray Harrell Sent: Wednesday, April 11, 2012 10:05 AM To: 'Keith Hudson'; 'RE-DESIGNING WORK, INCOME DISTRIBUTION, EDUCATION' Subject: Re: [Futurework] FW: Progressive taxation -- what a concept! Keith and Harry. You speak from a European cultural bias that directly funds its charities through the government including the Arts. I realize Harry lives in the most blessed culture in America for weather, beauty and natural resources. It's easy to draw conclusions from such plenty but hard to comprehend scarcity elsewhere. But the British and Continental support for charitables is direct and not indirect as here. California has the most productive economic resource in America in the Entertainment Industry. European support for culture and American West Coast Luxury the dream of every Okie during the depression and they are still playing it down as we enter another possible depression. Harry will have to pay to defend what he has or his kids will, when people start migrating again to the West for a job. Naturally Californians "poor mouth" themselves which pisses off Texans (remember Enron?). A direct subsidy for culture and charitables is not what happens in the rest of America including the musical capital at Lincoln Center. That is not what happens America and is why the idea of a Flat Tax constitutes theft from the culture since the wealthy gain nothing by supporting charitables and culture if they have no tax break as in the flat tax. David Koch got his name put on the "New York State Theater" at Lincoln Center when he "donated" over a hundred million to renovate one theater. Of course the American people gave him 33 million in return as a tax break and this privateer gets to put his name on the theater funded by the people New York State and go down in history as a supporter of the Arts when in effect he is trying the kill the arts by actively pushing the "Flat Tax" structure through his foundations and the Cato Institute. What you and Harry don't seem to realize is that the American system is built on the private support for non-profits and that the tax break constitutes incentive. Without that incentive there is only the unselfish, altruistic, goodness of their heart or Christian conscience of the wealthy (remember there is less direct government support for the Arts and Charitables in America than from the City of New York's Department of Cultural Affairs) and we see how far that goes. When followers of Ayn Rand preach her sermons they rarely examine the luxurious context in Hollywood that she wrote from. She had as much of a knowledge of the real America as any other Russian Immigrant writing movie scripts about Indians that furthered genocide and prejudice and made us their stand in for the Japanese during WWII. I've fought that all of my life and Rand was definitely a minority in the religion that she refused to acknowledge and the deep springs that within her mind turned putrid. We have versions of such things in our communities as well. They create division, show no generosity and have no sense of the whole of reality beyond their own province. A fact which indicates how far they have traveled in the seven levels of their spirituality. Such people would have cut down all of the Sequoyah Redwoods long ago and opened Yosemite to private enterprise and built dams in the valley as they did once before in Yosemite and at Glen Canyon. They forgot their mother and converted to the religion of the African termite. REH From: [email protected] [mailto:[email protected]] On Behalf Of Keith Hudson Sent: Wednesday, April 11, 2012 3:26 AM To: RE-DESIGNING WORK, INCOME DISTRIBUTION, EDUCATION; Harry Pollard Subject: Re: [Futurework] FW: Progressive taxation -- what a concept! Harry, Good to see you emerging from the woodwork. I totally agree with what you have written. The more "progressive" a tax system is the more it will be successfully evaded by the rich because they can always employ cleverer people than politicians or civil servants. There's only one tax that's fair and which can't be evaded. This is a flat tax on the value of possessions which are publicly exhibited for status reasons -- house, personal jewellery, car, airplane, etc. This would even catch those who have no provable income but are suspected of being major criminals. If a very rich person (e.g. Warren Buffet) wants to avoid heavy taxation by living simply, well, that's fine. If he isn't spending his money personally then it's either being invested (giving jobs to others) or it's going to a charity (for public benefit). If someone who derives his wealth from the citizens of country A wants to avoid taxation by living and enjoying his personal possessions in country B for all or part of the year, well, that's fine, too. If X is the number of days he spends abroad then Government A simply requisitions his corporate possessions in country A for that financial year (and receives income therefrom) in the ratio X/365. Keith At 16:37 10/04/2012, you wrote: Progressive taxation is a terrible concept. If you are rich because governmental actions give you a special privilege you should pay it all back - in other words the special deal should be removed. If you are rich because you produce things - or provide services - that people want, you shouldn't pay anything. There is an economic argument that if taxation reduces the income of someone who is needed in the system, then taxing him, thereby reducing his take, will make his occupation less attractive to new prospects, thus producing a shortage. To induce more people to undergo the training and devote the time needed to join this occupation, wages will rise, perhaps to a point where after tax income will be at the required level to keep the occupation manned (or womanned)! In other words, the tax payment is avoided by the intended target. So, who pays the tax? Well, the customer always pays. This result can be noted when it is suggested that instead of taxing the common people, taxes on business will be increased. (They are trying to do this in Los Angeles now.) So, business pays the tax and promptly passes it on to their customers. So the idiots who support a "business tax" pay it themselves. Harry \\\\\\\\\\\\\\\\\\\ On Sun, Apr 8, 2012 at 2:12 AM, michael gurstein <[email protected]> wrote: -----Original Message----- From: [email protected] [ mailto:[email protected] <mailto:[email protected]> ] On Behalf Of Sid Shniad Sent: Friday, April 06, 2012 4:18 PM Subject: Progressive taxation -- what a concept! * http://www.thestar.com/news/canada/politics/article/1149981--walkom-these-high-income-docs-want-the-rich-to-pay Toronto Star March 21, 2012 These high-income docs want the rich to pay Thomas Walkom* Here’s a novel idea. A new organization of well-paid doctors thinks that they — and other high-income earners — should pay more in taxes. “Who knows?†physician Michael Rachlis, one of the founders of Doctors for Fair Taxation, told me Wednesday. “Maybe we’ll start a trend. Maybe we’ll see a Lawyers for Fair Taxation start up.†I’m not going to hold my breath. Still, it’s refreshing to see someone stand up for a more progressive tax system. The conventional wisdom these days is that progressivity in taxation — the notion that people should pay proportionally more as their incomes rise — is counterproductive. Most governments don’t have the nerve to scrap progressive taxation entirely. So they’ve been doing it gradually by reducing the number of income-tax brackets and by raising more money through user fees and consumption levies like the HST. They’ve have been aided and abetted in this by mainstream economists who argue, usually without any proof, that taxes on income discourage people from working. The upshot of this, as a recent study from the Canadian Centre for Policy Alternatives demonstrates, is that the poor in Canada now pay a greater share of their income to government in the form of taxes than do the ultra rich. Which is the antithesis of the bargain made when governments first began to levy income taxes almost 100 years ago. Doctors for Fair Taxation argues that a more progressive tax system would be good for human health. First there’s the obvious point. Governments almost invariably deal with their fiscal problems by cutting back spending on health care. Both Prime Minister Stephen Harper’s federal Conservatives and Ontario Premier Dalton McGuinty’s Liberals are heading down this path. The second point, well-known since the 1970s, is that poverty breeds poor health. The uber-rich may not like sharing their money with the very poor. But doing so increases the overall health of Canadian society and, in the end, is both cheaper and more efficient than allowing an underclass to fester. The third point, demonstrated by history, is that society as a whole does better when there are fewer income extremes. Such stolidly middle-class societies tend to be more stable, less violent and more productive. The suggestions by Doctors for Fair Taxation are modest. The group recommends that the federal and provincial governments create four new tax brackets for those earning more than $100,000. Someone with a taxable income of $170,000 would pay an extra $1,400. But someone earning $7 million would pay an extra $787,400. Rachlis figures the scheme would net Ottawa an extra $3.5 billion a year and Ontario an additional $1.7 billion. That’s not enough to wipe out the deficit for either level of government. But it would go partway along the path. More to the point, it would preclude the need for drastic spending cuts. Up to now, the anti-tax movement has held centre stage. Even leftish politicians are reluctant to talk of taxing the wealthy. In Ontario, New Democratic Party Leader Andrea Horwath focuses instead on taxing anonymous corporations, in the hope that this won’t spook voters. Yet, there’s nothing wrong with having the well-to-do pay more. It’s fair. It works. We’ve done it successfully. So kudos to this new pro-tax bunch. Usually, when people talk of taxing the rich, they exclude themselves. This group may be quixotic. But at least it doesn’t employ that dodge. The average gross income for Ontario physicians is about $325,000. Doctors for Fair Taxation reckon people making that kind of money can pay a little more. They’re right. Thomas Walkom’s column appears Wednesday, Thursday and Saturday. _______________________________________________ Futurework mailing list [email protected] https://lists.uwaterloo.ca/mailman/listinfo/futurework _______________________________________________ Futurework mailing list [email protected] https://lists.uwaterloo.ca/mailman/listinfo/futurework Keith Hudson, Saltford, England http://allisstatus.wordpress.com <http://allisstatus.wordpress.com/>
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