“Finance is a gun and politics is knowing when to pull the trigger.”

In the movie Godfather Part III Michael Corleone is trying to leave his mafia connections behind by moving his looted wealth into legitimate businesses. In a moment of candor Michael angrily tells his sister Connie, “The higher I go in society, the more crooked it becomes!”

With oil at $135.00 per barrel and gasoline approaching $5.00 per gallon, there has been a lot of Sturm und Drang among politicians over what is causing these prices. One thing is clear, explaining the entire mess as being due to supply and demand is simply insulting. The actual cause for high oil prices are many and involve a confluence of events that begin with that secret conference Vice President Cheney had with the energy industry during the spring of 2001. During those meetings Cheney agreed to rein in the Commodity Futures Trading Commission (CFTC). The CFTC is the federal agency that regulates oil trading. The CFTC in 2001 began exempting financial firms from rules that limit speculative buying. The CFTC has also waived regulations on U.S. investors who trade commodities on overseas markets, allowing them to accumulate large quantities of the future oil supply by making purchases on lightly regulated foreign exchanges. Oil futures are then bundled into securities and sold off to investors, mostly big banks and hedge funds.

After deregulating the oil futures market, Bush and Cheney conned the American people into the Iraq war and financed the war on borrowed money thereby weakening the dollar. Since oil is purchased on the international market in dollars, a weaken dollar drove the price of oil up. On top of all these high finance shenanigans, the Federal Reserve continued following it’s policy of low interest rates. Other central banks then drove up their interest rates in order to attract more investment in their currencies which further weaken the dollar. Then Saudi Arabia took a several hundred billion dollar drubbing in the United States sub-prime real estate market.
Finally, the Bush government is pumping millions of barrels of oil into the Strategic Oil Reserve (SOR). If Bush instead pumped out a million barrels per day over the entire summer, the SOR would by depleted by a mere 15% and oil prices would come way down.

Near the climax of the Godfather Part III, Don Lucchesi, interlocker of the Italian political establishment and the mafia, tells Michael Corleone’s bastard nephew Vincent Mancini, “Finance is a gun and politics is knowing when to pull the trigger.” In our America today George Bush and the political establishment are pulling the trigger but only a bang flag pops out.


June 2008