We have likely avoided global economic oblivion.  The Republicans, who are largely at fault for this horrible experience, have been incessantly whining about spending, self-dealing, and anything else their focus groups can come up with: how truly ignorant, and dangerous to the world.

We, the world, owe a debt of gratitude: first, to Ben Bernanke, who came in modestly, faced a completely frightening task, and did it well, while ignoring the many partisan voices that had no backing in intelligence or data.

Second, to Hank Paulson, who also was and remains a subject of criticism, for many imagined wrongs, while he, at the time, was the only officer awake on deck.  Imagine having been Paulson, surrounded by economic idiots like Bush and Cheney, and staring over the edge into what not only seemed like, but really was, the Abyss.  Thank you, Hank, for scaring DC just enough to get their jowls out of the troughs and do some meaningful things to avoid disaster, without scaring the world so much that the sky fell in.

Even more to the point, we have Barack Obama, and his hand-picked team of professionals, who since the early days have quietly, every morning, looked into that same Abyss, and reduced its depth by a few miles.  No one is getting any thanks for this, so I would like to go on record for appreciating the difficulties, intellectual, emotional and political, that these chosen financial professionals are experiencing dailly, and conquering as they go.

So that is the Good News: by accident, we had an expert in place in a Bush administration riddled with amateurs.  And we chose Obama, who did what we hoped, and picked the best people in the country to take the wheel.

The Bad News: it isn’t over.  We’re about at the half-way point now.  We are not going to repeat the Great Depression, I think, and that is great, but this is the moment of second-greatest danger, as everyone assumes we’re OK, when we are not there yet.  What I mean by this: there remain plenty of actors on Wall Street who were doing intellectually dishonest things to “make money” without creating value, and who are ready tonight to go right back at it, hammer and tongs, without a second thought.  Wow!  Really?

One example of this is in the oil pricing story, where the same schemers are now back again, driving up prices without a thought: why should they care if their personal antics, worth a few bucks in income, put a heavy tax on the global economy?  They just don’t get it.  Since they don’t, I hope someone in Washington will, and will decide that price manipulation of energy is a federal felony worth prison time.  More to the point, that they will seek out such miscreants and put these white collar criminals behind bars for a very, very long time.

Given that the worst is over, but the battle is not, now is a good time for our subscribers, members and blog readers to be vigilant, careful, and not to act as though risks are now history.  Plenty of small banks will fail in the next year (watch out, Georgia); California will likely go bankrupt in some form within 90-120 days.  More people will lose their jobs, and retail in the U.S., our largest economic input historically, will be in the gutter. 

But for those who are careful and paying attention, there are already opportunities, globally and locally, in U.S. real estate, in commodities (copper in China, anyone?), in large scale opportunities in alternative and clean energy.  The world is changing in fundamental ways, and that is always the best time to make money.

So, again: Thank you, Hank, Ben, Barack, and Tim.  The world owes everything to you, after we twice ran the Monkey in the Cockpit test. 

Whatever the angry men on radio and TV are shouting out this week, you saved us from that darkness over the edge that Hank saw the weekend after Lehman failed. 

For those who are serious about making money, there are today more ways of doing so than there have been for many years, and these are real, rather than fraudulent.  And for those who are serious about world affairs, we are back in adult, professional hands, and none to soon.  Now we just have to be very, very careful.

Amazing that Fortune magazine would put a cover up claiming that a) the sub-prime mess was the whole story (it was a minor subplot), and then feature an unknown woman banker who saw the sub-prime mess coming.

If Fortune is that embarrassingly blind, no surprise that no one else is seeing causes and effects very clearly. And Fortune is in good company: Portfolio put Michael Lewis’ story on calling the subprime mess on their cover, too. Oops. Myopic at best.

So, what are the key causes that seem still uncovered, or poorly understood, and what was their role? Without going through them in detail, here are the major bones in the corpse:

1. Free money. Japan knowingly blew up the global economy. Why, is another matter.

2. The Trigger Theory. Using OPEC to get supply and demand close, oil industry players gamed oil pricing, driving it from market rates ($50-80) to $147. The first investigation of these players was announced this week; it looks like the SNS Trigger Theory is in the process of being confirmed. I just hope you read about it in the media, outside SNS.

3. Greenspan. This has been covered, but often completely wrongly: Greenspan is guilty of trying to manipulate equities markets, and using rates to do it. He and others have tried, quite successfully, to put out a smoke screen stating the opposite: that he didn’t manage the Nasdaq bubble quickly enough, etc. He personally created the local refi bubble in the U.S., leading to the sub-prime mess. But don’t forget that many nations experienced real estate bubbles, since the real cause was a global liquidity bubble.

4. Musical Chairs. Banks were playing fast and loose for years before the sub-prime debacle, but when it put a spotlight on their problems, they froze up. The main reason the TARP bailout has been so ineffective, the reason they are not using these funds for loans, is that they were already breaking reserve requirements, running debt off their balance sheets, and participating in contracts that put them way out of compliance with the few regulations left. The real story, not yet told, is how sick the banks were before the sub-prime mess.

5. The fear of inflation. Since the real problem, at the beginning, was too much liquidity in the global system, it makes sense that, even though we are temporarily facing credit restrictions, the long term problem has neither gone away, nor been attacked or resolved. In other words, as soon as the short-term credit problems are eased, the world will be facing a huge inflationary bubble again. And no one seems to be talking about, working on, or writing about, that either.

Finally, I’ll share a little frustration. Everyone, literally including the Pope, who has ever said the sky is going to fall, is now promoting themselves as having foreseen the current crisis, with its proper causes. The pope said it was lack of ethics, back in 1985. Well-known bears like Rubini, complaining for sometimes a decade or more without making specific predictions, are permanent bears, and we have a lot of permanent bears on a planet driven by rich shorts from Connecticut, most of whose houses are now for sale.

Maybe someone else saw this catastrophe for what it really was, as cause and effect, and said so publicly; if so, hats off to them, we need their insight. The rest of you amateurs ought to admit that you didn’t see the forest for the trees, and stop all of your unwarranted claims. Get off the TV and the covers of Fortune etc., and leave the FT alone. We need less stupid chatter, and more intelligent help from those who legitimately got it right.

He can’t just be insane, so — what is it?  What explains his behavior?

Today, as Congress fished around for money to save the U.S. auto companies, in a pickle because they had not invested earlier in alternative – energy projects, George Bush gave a speech, suggesting that Congress take the money from alternative energy projects to prop up the dying carmakers.

Is he really an idiot?

Some day, in the not so distant future, several things may happen:

1. As laid out in Harper’s this month, the President, the Real President (Cheney) et. al may face domestic or international criminal charges for war crimes.

2. Not that George can not pardon himself or others for international crimes, as in the Nurnburg Trial.  Even if he escapes domestic prosecution, he may end up like Pinochet, hounded worldwide by courts elsewhere, kidnapped, dragged around, arrested and jailed elsehwhere, etc.

3. The simplest way to understand the entire Cheney/Bush regime is to assume that family ties to the Saudis were more important than catching bin Laden, that oil in general was more important than anything Bush swore to uphold on that Bible during his inauguration, and that Bush et. al (the heading on future lawsuits, ad infinitum) were embarked on an intentional, planned, consistent program of looting taxpayer monies for their personal and private benefit.

It is impossible to forget: We still have a month and more to go.  There are plenty of miscreants on a master scale who would like to have a parting shot at screwing everything up for normal people in return for private gain, at the cost of a single large check to the Bush Library (Bush doesn’t read books; what a joke).

Bend over, and Get ready.  George never cared for us then, and he still doesn’t today.  He serves only his family, and a few close “friends.”

Because of a cancellation, I will be the next speaker, on November 6th, Thursday eve, at the San Juan Room in the Friday Harbor House in Friday Harbor, at 7pm.  I’ll be talking about the economy, how we got here, and where we go next.   The evening is free, and anyone interested in these subjects is welcome to attend.

In this month’s conversation, Strategic News Service publisher Mark Anderson tells KPLU’s Dave Meyer about hot money and the oil bubble.”

Listen now: http://www.publicbroadcasting.net/kplu/news.newsmain?action=article&ARTICLE_ID=1373074

In the U.S., the financial subsectors are going into crisis one after the other, every few days.

To some degree, Paulson is able to get slightly ahead of the curve (as I think he did with Merrill last weekend), precipitating a workout before it hits the papers.  But the real problem is the roll call itself.

Next up, I expect we’ll see the mutual funds, then some more commercial banks, maybe bail out the FDIC, FSLIC, and then the Pension Guaranty Fund.

If too much liquidity is the root cause of all this, with the stuff you hear on the tube as the secondary set of causes, then it is fair to ask what led to so much money sloshing around, inflating housing and asset bubbles worldwide.

I have an answer: the transfer of money from relatively diverse, well-selected assets (stocks and bonds) into the hands of the petro-winners.

SNS members know that I am adding this to a previously-watched leak in the Japanese carry trade, which probably provided about $3T plus in liquidity, much of it over about a five year run.  But it would be silly to discount the effect of taking another $700B per year or so in wealth transfer forced by oil and gas price increases, and not ask where the money went next.

While you’re chewing on that, I think it’s only fair to ask the obvious follow-on question: now that new reports show conclusively that oil price peaks were caused by an unusual amount of speculation, isn’t it reasonable to ask whether those speculators might not have included those making the most money?

How much of the money driving up oil pricing through futures contracts and other non-user purchasers came as petro profits?  It would be hard Not to make this move, if you were, say, Saudi, or ExxonMobil, wouldn’t it?  Not only are you making obscene profits per barrel, but you make more profits on the options, which in turn drive up the price of what you’re making, by a huge percentage (let’s say, 100%).  So: you make money on the oil, you make money on the options, and you make more money on the oil price increase, which feeds the options frenzy, where you make more money —

You don’t think there was hot petro money in the oil futures market, do you?

It will be interesting to see what happens in Sen. Maria Cantwell’s hearings this week, and whether they can track back into the market, not just to speculation, but to speculators.  Martin Tobias, past CEO of Imperium Renewables, wrote a Special Letter for SNS in which he suggested finding trades (and perhaps tracking them  back) that seemed to come from oil companies, driving the price of his feedstock beyond what his business model could bear.

I don’t have any evidence, yet, that this has happened.  But it’s hard to believe that, in some quiet way (who would ever want to be discovered doing this?), someone between Putin, Chavez, the Saudis, Qatar, and Exxon, didn’t come up with this totally legal no-brainer for getting rich – and really screwing the global economy at the same time.

Shall we call this theory Osama’s Revenge?  He’s well understood to have planned to bleed the West to death.  Why not do it using the commodities markets, instead of bullets?  Of course, I don’t mean him, per se – but maybe one or two of his countless cousins and closet followers, still in favor in the Bush white house, and in Riyadh?

Now there’s an energy policy you can take to the bank.

And, perhaps for a minute or two, I thought there really was a chance that Medvedev would act as though he came from, or were hoping now to create, a 20th century country, with 20th century business practices.  It’s never too late, right?

What better way to win a business negotiation than to cancel the CEO’s visa – and that of almost all his key engineering staff?  Or intimidate the CFO until he quits, which happened yesterday?

This goes on, of course, even as Medvedev gives public speeches showing he isn’t really Putin’s Poodle, by appearing to criticize The Boss in public over the importance of property and shareholder rights, and business practices, etc. etc. etc.

BS.

I was going to write a bit about how the Russians would win this argument, using the same fake tax/eco permit/government pressure tactics Shell and others experienced in being squeezed out of their investment positions, but I held off.

That was stupid.

Given the experience that these powerful western companies have had in Russia, why would anyone, underline Anyone, invest there today?  No free speech.  No democracy.  No real parliament.  No rule of law.  A general attitude of thuggery, violence and assassination as common business tactics.  I mean, really, who is dumb enough to say to him or herself, ah, that only happened to those other guys, that could never happen to me?

Even for the most philistine-like business czars, Putin/Stalin’s Russia takes the breath – and the money – away.

Does Russia now end up being the not-secret hub of a new, KGB/FSB global kleptocracy?  Is this a bad 1960s James Bond movie?

With the assassination of Litvinenko by a charged KGB operative who then gets immunity by running for – and achieving – a parliament seat, nothing is too far-fetched, and indeed, the movies seem tame compared to killing with transuranium elements and assassinating critics in cold blood as a little present on Putin’s birthday.

I have noticed McCain raising a little Hell about all this, but why isn’t the world at large taking on the Bear?  Is Europe so cowed over future gas and oil supplies that she dare not peep?  We have a monster rapidly taking shape on the global horizon, and it’s past time for the rest of the world to speak up.

Or, as Robert Mugabe would say, Don’t bother.

I first suggested this subject in my opening remarks at FiRe 2008, and my thinking hasn’t changed much since then.  Here is what I see for oil pricing in the near term future:

Because it is keying primarily off of speculation, today’s pricing will continue to rise until the November election.  I don’t know how far they can take it, although if you take a look, it has been on a straight line increase for the last six months or so, and I see no reason for this not to continue during that term.

After the election, we have two different paths.  And this is where it gets fun, I’ve found, because my call seems to run counter to the intuition of a lot of consumers.

If McCain is elected, the price will fall just slightly, bracketed at the low end in the $125 / bbl range.  The chances for its continued rise after this are high.

If Obama wins, the price will drop more, probably bracketed at the bottom in the $95 / bbl range.  The chances for continued increases are lower, and the chances of a lower rate of increase are higher.

In other words, the US and global economies will be under less pricing pressure for oil if Obama wins.

Here is my reasoning:

The price today contains about a 40-45% premium from speculation (I agree with Soros on this).  Speculators love fear, war, uncertainty, and anything else that leads to volatility.  Additionally, nations like Iraq, Venezuela, Iran, Saudi, etc. that have responded negatively to US military moves in the Mideast by pumping or delivering less oil to the US (or raising prices, or restricting access, etc.), are more likely to continue doing so under a leader vowing to continue the military footsteps of the Bush administration.

Conversely, if Obama makes moves of withdrawal from Iraq of any real kind, and indicates to the Middle East that he is seeking peace, the result will be a reduction in speculation and volatility, and an increase in volumes made available to the US and world markets.

As for the numbers, the routines for getting the exact figures are a bit hard to define – and, of course, they may be inexact.

But I have no doubt regarding the fact of paying a McCain premium, any more than one would doubt we are now paying a Bush premium. 

Because oil pricing is probably the most important economic parameter of the decade, this differential ought to be part of any discussion of election politics, regardless of the points of view of those involved.

I hope that this spurs that debate.

Perhaps we’ve reached the point already when a serious conversation needs to be had about speculation in the energy markets. This is my polite way of saying: perhaps we should rid the energy markets of speculation by the vampires.

There’s nothing wrong with people in the actual market doing their best to hedge against future price increases (SW Airlines would be a great example), but one can honestly question whether we’ve now moved, in just a few weeks, from a time when the hedge etc. vampires are not just taking profit without contributing, but are actually endangering economic stability.

Kids in college learn that free markets generally increase stability; here, we have the opposite case. If the vampires drive inflation and threaten equity markets without contributing an economic good, it might be time to move to the next century in terms of market regulation.

By restricting market access in oil to those who actually use it, we would be doing the world a gigantic favor, when it was most needed. Everyone from the Saudis to the Bushes ought to get behind this one.

That’s right: speculation is as old as the hills. Everyone does it. But what if a few very large players realized that, simply by the fact of speculating, they could create a new landscape for making profits? What if, for instance, just by creating volatility, they could increase their profits ?

Well, I think not only, can they, but they are.

It is likely that prices for stocks, bonds and commodities have always carried a veneer of this, a small premium in speculation costs just for being an open market. How much? Maybe a few percent in calm markets, maybe as much as 5-10% in very active markets.

Members know I have long been convinced that consumers are being gamed in both the gas and oil markets. We’ll now use the oil market as an example.

Senator Maria Cantwell (D, WA) opened hearings this morning on the price of oil. While I’ve yet to see an investigation properly done into this question, Maria and her staff are coming about as close as one can get. She mentioned Enron’s gaming of California for all those troglodytes who think we can’t or wouldn’t be gamed by energy companies.

Two of her witnesses made estimates of how much of today’s oil price is due purely to speculation. Last time I checked this out, the figure out of Wall St. was about 20% – a record in this market, where the same figure used to be in the 10% or less range.

Today’s witnesses put the fraction of today’s oil price caused by speculation at 25% (a retail expert) or 50% (an oil commodity expert). I’m fairly sure the second figure is closer to the truth.

What good comes from those who drive prices up and take their profits from the froth? Other than paying their bar bills and mortgages, I’d say no good at all. Clearly, consumers are harmed, as are all legitimate players in the fuel supply chain.

Are these hyenas in wheat, too? And rice? And —

I expect they are in every market naive or thin enough to be manipulated with large investment sums. Perhaps vampires are a better name for these players, since they weaken others while filling their appetites for ill-gotten gains.

Can the world afford this new vampire investor class? The news is rife with stories of companies bankrupting, people going unfed, car companies suffering, consumers no longer traveling, inflation running out of control — no, we can’t afford them.

Would someone please drive a wooden stake through their collective hearts, and soon?

My heartfelt thanks to Maria Cantwell.