Wall Street Manipulation All Over the Map

by John M. Curtis
(310) 204-8700

Copyright March 21, 2011
All Rights Reserved.                                         

             Wall Street’s spin machine continues the unrelenting task of profit-making for the nation’s biggest funds and brokerage firms.  Today’s war in Libya, unrest the Middle East, expected bankruptcy of Portugal and disaster recovery efforts from the March 11 9.0 earthquake and tsunami in Japan all indicate that Wall Street seeks to profit from human misery.  No matter what damage Mother Nature wreaked on Japan last week, currency traders seized the opportunity to maximize profits, boosting the yen to historic highs against the U.S. dollar.  No one expects Japan’s economy to do anything other than sink from its latest natural disaster yet currency traders boosted the yen to historic heights.  Running at 81.05 yen to the U.S. dollar, the yen has done nothing but go up since the tsunami hit March 11.  Currency traders pounced on an opportunity to profit on Japan’s disaster.

            It’s beyond ironic that the yen rose so steeply that the G-7 had to dump yen on currency exchanges to drop its value.  Natural disasters of the magnitude seen on the March 11 earthquake and tsunami should have dropped the yen against all major currencies.  Instead the yen shot up like a rocket, demonstrating the wild speculation seen in currency markets, having no connection to supply-and-demand or any other economic principle.  Like the yen, the euro too has gone through the roof against the U.S. dollar in recent weeks with the dollar losing some 10%.  Yet news of Portugal’s possible default and bailout did nothing to stop the euro’s upward trend.  Like stocks, when currencies get overly inflated, traders dump them and watch values plummet.  Wall Street always puts out its usual news stories to justify upward or downward movement in stocks, commodities or currencies.

            Like stocks and currencies, commodities like gold, silver and oil also vary based certain inflection or tipping points.  Wall Street attributes today’s upward bump in oil prices to political instability in the Middle East and North Africa.  When the U.S. and NATO didn’t intervene in Libya, oil prices rose.  When they finally jumped into the fray March 19, oil prices also went up.  Commodity traders at the New York Mercantile Exchange still think they can drive oil prices higher, before the next inflection point, where inflated pump prices cause too much conservation.  Wall Street seizes on geopolitical events to justify buying or selling various stocks, currencies and commodities.  Oil industry analysts know that there’s little actual correlation between crude oil prices and pump prices.  U.S. oil companies will have a lot of explaining to do after reporting Q-1 results.

            When the conflict started in Libya in early March, Wall Street blamed the price spike on a drop in Libya’s daily oil production.  Saudi Arabia, the world’s biggest oil exporter, promised immediately to make up the difference to keep oil prices from going through the roof.  No one better than the Saudis know what happens with inflated oil prices.  They know oil companies arbitrarily raise pump prices to the point consumers begin scaling back, hurting worldwide petroleum sales.  “The key is really how Saudi [Arabia] and Iran play out.  Cool head need to prevail.  It’s contained at the moment, but if things worsen, you see a Mideast premium very quickly,” said Jonathan Barratt, managing director of Commodity Brokering Services.  Barratt knows that oil-producing countries have little to do with how NYMEX traders exploit geopolitical events to manipulate prices.

            Traders on the NYMEX and other foreign commodity exchanges pay little attention to actual supply-and-demand.  They’re sensitive to “news” only to the extent that they can justify price hikes or drops.  “Gasoline is following crude oil and there is seasonality, as we come out of the heating oil season and approach the driving demand season,” said Robert Yanger, senior vice president for energy futures at MF Global in New York, admitting, that expectations on more driving cause pump prices to spike sometime before summer vacation.   Without some type of government regulation on oil prices, “free trading” at the NYMEX and other commodity floors drive pump prices into oblivion, causing harm to the U.S. economy. Given the fragile economic recovery, it’s unreasonable for the oil industry, or its friends on commodity trading floors, to drive prices through the roof.

            No one industry should have a chokehold on the U.S. economy. Today’s unregulated trading at the NYMEX and other foreign trading floors bid crude oil and gasoline futures into the stratosphere.  Inflated pump prices become a punitive tax on consumers, preventing them from the spending necessary to boost the nation’s Gross Domestic Product.  Letting traders dictate oil prices puts the economy at risk, crying out for some type of regulation.  Creating news stories to justify price spikes only fuels the kind of cynical manipulation that leaves consumers holding the bag.  Whether you actually regulate commodity trading or not, the White House needs to coordinate with the Federal Reserve Board and start communicating with the oil industry and NYMEX.  President Barack Obama should notify the oil industry that he’ll be looking carefully at their Q-1 results.

John M. Curtis writes politically neutral commentary analyzing spin in national and global news. He's editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.

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