Saturday, June 25, 2011

Crude Oil Release from Strategic Petroleum Reserve (SPR) Sticks It to Speculators

At last, a real effort to bring the oil speculators to heel.

Here is the background on the SPR and a story from US News on the release of 30 million galleons of petroleum to the commercial market from our current pool of 727 million gallons. Other countries also released another 30 Million gallons from their reserves.

The US release amounts to only 4.1% of our current government owned petroleum pool. What it portends has created a storm among the financial speculators and others profiting from high oil prices. This is finally an aggressive first step toward bringing stable and reasonably predictable prices to the petroleum market. It is great news for the preponderance of businesses for which petroleum products are important costs. It could be a God send for small businesses, manufacturers, the transportation sector, and the economy in general. All of these industries have been hurt badly by the volatility of petroleum prices. The release is bad news for the financial institutions that make hugh profits by speculation in petroleum prices. It reduces the influence of OPEC and is hated by the American Petroleum Institute. .

The puppet media, bought congressmen, and the financial speculators that gain by making the market volatile are screaming about government interferences with their game. Somehow it is fine for government bailed out members of the financial sector to buy and hold tankers filled with petroleum for a higher price but it is terrible for the government to do something to lower the price to the economy and the citizens.

This release was done by Presidential memo. If congressional approval was required it would not have had a chance against the special interest lobbying.

Operated carefully we can begin to get value from our 80 billion dollar investment that is now sitting idle in salt domes. If the price of petroleum would surge to a high price for reasons other than pure supply and demand a small amount of petroleum will be injected into the market to bring it down. That petroleum would be replaced in the reserve when the market returns to a lower price. The average amount in the reserve for emergency use would stay the same while the volatility of the market would be checked. There would be room for true business based hedging but no profit in wild speculation on price. This will remove a major financial risk to businesses. It is a good thing and if not derailed its’ effects will reverberate though the economy.

You can expect a major effort by the special interests to derail this. As I finish this post CNN is reporting on my TV on the decision to release the 30 million gallons. The newscaster claims that “the business community” complains that we should not release this small amount oil because it was “there for an emergency”. What a red herring! Who is this “business community?” Obviously a very select group of petroleum sellers and financial speculators. The newscaster did admit that other countries were also doing releases from their reserves.

You will be hearing lots of twisted logic from these self interests. Don’t believe them. They are not friends of the American citizens and definitely not trying to help with the recovery.

Saturday, June 18, 2011

American Dream vs. Bean Counters

The cerebral cortex (i.e. problem solving) component of the Government has shut down. The conversion of our nations’ management from a producing to a corrupt financial society has left millions unemployed, and losing their homes. As our infrastructure decays the two party government that is suppose to protect us from such mistakes continues to fail. The focus on loyalty to the party instead of to the citizens is obvious. The latest poll shows that Congress in total has a favorable rating of only 17%. We have no current means of correction. At the next election in 2012 we will be given choices between candites selected by the same two parties that have led us here. There seems nowhere to turn.

Bob Lutz, a long time executive in the automobile industry who returned from retirement to help GM through its’ recovery has written a book “Car Guys vs. Bean Counters”, The book describes the difference between product people and bean counters. Car guys love cars and take pride in the manufacturing of automobiles that are creative and give the customer pride in their ownership. Bean counters view the automobile as an object of finance that has value only by the short term money that can be extracted from it.

Although the subprime financial meltdown and high price of oil were major hits to the industry, the rise to power of the bean counters was the killing event for General Motors. The book is a detailed description of how the bean counters coming to power brought associated actions that almost destroyed General Motors. The bean counters business plan emphasized making the minimum car that extracted the most money from the customers. The car guys’ goal was to make automobiles that gave the customers maximum value for the price. As the customers were exposed to automobiles built under the bean counter philosophy they moved to other companies that gave them better value. Taking design, manufacturing, quality control and company philosophy back from the bean counters was a major milestone toward survival.

It is a great read for those who have followed the automobile industry. As I read it I was struck by how closely this story describes what we need to accomplish to manage our country. If only congress was controlled by those who love and really care about America and its citizens. This is in contrast to the current environment where decision making is under control of those who view the citizen as a financial object for exploitation. It would be great if someday we could write a book with the title “The America Dream vs. Bean Counters” that described how the US was turned around.

A key event in the resurgence of GM was the creation of an energized work force that was dedicated to creating products that please the customer. Our governance is failing miserably in this area.

It is encouraging that once the “car guys” attitude began to be established in GM the employees became re-energized and creative. There was actually plenty of talent available but it was being hobbled by the bean counter management. Perhaps this is true for congress. An approval of only 17% would certainly seem to be a legitimate reason for a change of leadership.

In discussing the tough competitive environment that the American auto industry must meet in the future Bob Lutz begins his conclusion with the following statement.

In a sense the decline, failure, and rebirth of General Motors is simply a metaphor for what is happening in the whole United States
I certainly agree.

Monday, June 13, 2011

Major Political Parties Underestimating the Nations Anger


Political parties were just on the horizon when our country was formed. They are not mentioned in the Constitution. Our founders however, gave us due warning that it allowed to develop they could prove disastrous to the nation. One example is the special warning George Washington gave in his farewell address

The common and continual mischiefs of the spirit of party are sufficient to make it the interest of a wise people to discourage and restrain it. It serves always to distract the public counsels and enfeeble the public administration. It agitates the community with ill founded jealousies and false alarms; kindles the animosity of one part against another, foments occasional riot and insurrection. It opens the door to foreign influence and corruption, which find a facilitated access to the government itself through the channels of party passions.
Similar warnings were given by the other founders. Sadly, we did not listen. By allowing only two political parties to control the nations election process we have seen all of the warnings become true. In effect, over the last 150 years, we have turned our democracy over to two self-serving organizations that focus on their own power. They have taken over every important step of the electoral process. for their own gain.

Every citizen sees firsthand the results of this situation

We have corrupt and weak candidate from both parties that are financed and controlled by special interests. There is more loyalty shown to party and to these financiers than to the citizens. Our choice in elections is limited to two sets of weak candidates that have been filtered through party only primary elections. These electionst favor extreme ideologues from both the left and right, with no choice available for moderate citizens.

The leadership of our country has been transferred from a productive to a financial elite. These financial elite, in turn, have mismanaged our economy and caused trillions of dollars of damage. This hardship for this is being placed on the American citizen.

The list goes on. We all watch as our elected government brings down our great country.

So what can we do?

Our two party system has almost 150 years of steady evolution and solidification of its position. Because their only competition in performance is the opposing party they have a very low bar for competency. Our rocking back and forth between two inept organizations each election will not fix the problem. Both parties are doing a terrible job but we are helpless to adequately punish them. Somehow we need to confront them with real competition from the many leaders that thrive in this country but are outside of the two party system. We must open up our governance to a broader talent pool.

Election Primaries for Unaffiliated Candidates

One scenario that could go a long way to accomplishing this is states running a third set of primary elections for unaffiliated candidates and voters. This would be in parallel with the two party’s primaries and have similar procedures. It would be funded by public contributions.

To participate in this primary the candidates must not be affiliated with one of the major political parties. The winners of the national unaffiliated primaries would be given slots on the election ballots as are the winners of the party primaries. This is not another political party, but an organization to get unaffiliated candidates before the voters. Voting would be for an individual candidate, not a political party.

Technically the unaffiliated primary campaign would appear very similar to that of the major parties. Only there would be a third track of candidates. You would have debates, a limited amount of promotion, and rules and fees to register as unaffiliated.

On primary day, depending on your affiliation, you would be given a Republican, Democrat, or Unaffiliated ballot to cast your votes’. On election day you would be selecting from individuals with Republican, Democrats, and Unaffiliated beside their names.

Is this radical change?

Giving unaffiliated voters the same election level of choice as party members? Is that such a radical idea? This effort would shake up and be fought vigorously by the major parties and the other special interests.

Only large numbers of angry citizen voters and continued poor performance by the two parties can make this happen. But it would really open up the talent pool and maybe even light a fire under the two underperforming parties.

And we would be getting back in sync with the Founders

Sunday, June 05, 2011

Apply Compensation Recovered from Financial Sector to Rebuilding Our Infrastructure

The purpose of the financial sector is to manage and encourage the nation’s flow of capital for beneficial uses. To obtain this service the nation has dedicated trillions of dollars to the industry. The sector, however, has lost or wasted a significant portion of these funds in a constant search for its own profits. This mismanagement has resulted in a major catastrophe for the nation and great harm to the lives of millions of citizens. Minimum operation was only partially returned to the completely disgraced system by the Government providing large injections of funds and guaranteeing the solvency of the major banks.

If the principles of capitalism had been applied at least six major banks would have been allowed to fail. The Government, in a tough decision to make, concluded that such widespread failure would present such a shock to the economy that we would enter a full fledged depression equal to or worse than any every experienced. They were in a position where they had to support incompetence to prevent a greater negative.

I cannot judge the wisdom of this decision. A complete breakdown was avoided. The banks are now making profits as usual but the nation still struggles with massive unemployment and lack of investment. Because of the recession and the associated loss of revenue we cannot even find the political courage for essential investing in the nation’s infrastructure.

In July 2110 the Dodd-Frank bill was passed to correct many of the financial sector operations which lead to this catastrophe. Having been saved by the Government intervention you would think that the industry would be despite to make amends and correct its’ errors. Instead it is spending large sums with lobbyists to prevent the laws effective implementation and to allow continuing with their operations and profit motivations unchanged.

There is no business sector that is held in less regard by the public than financials. The financial sector morally owes the country serious compensation to even allow it to continue to exist as currently structured. This is compensation that could be directly applied to infrastructure improvements and the associated employment.

The country needs it now.