The Great Depression Online

Great Depression Online Archive Issue:

Crude Grumblings

Great Depression Online
Long Beach, CA
March 27, 2009

Inside This Issue You Will Discover…

*** Taking the High Road
*** 5.6 million Now on the Dole
*** Crude Grumblings
*** And More

Taking the High Road

Jake DeSantis…we never met the guy.  In fact, we’d never heard of him until Wednesday.  But that was when, in a single New York Times op-ed piece, he stuck it to his now former boss Edward Liddy, out slighted Congress, and took the high road while publicly resigning from AIG.

Jake was one of the maligned AIG executives who received an outsized bonus from his employer while they were being showered with bailout money.  You know the story by now.  The public got word of the bonuses that were funded with bailout money and it became a populace hullaballoo.  The media, Senators, even the President…all freaked out.

Then last week Chief Executive Edward Liddy wimped out before Congress.  Next thing you know, he’s telling Jake and his cohorts to return at least half of the bonuses that he’d signed off on.  Meanwhile Congress was busy hatching a plan to, in the words of Senator Chuck Schumer, “virtually tax all of it.”

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We’ve stated our position on the issue numerous times.  We were against the AIG bailout.  And if there were no AIG bailout, there would be no bonuses for AIG executives.  For AIG, and AIG executives, would no longer exist.  So the real issue we should all be outraged over is the bailouts…the bonuses are just a sideshow.

But being what things are, we couldn’t help but sincerely appreciate the latest chapter in the fiasco.  That is: Jake resigned and is not returning the money.  Instead, he’s donating “his after-tax proceeds of $742,000 to charity.”

How do you like them apples?

5.6 million Now on the Dole

Regrettably, we learned yesterday the unemployment dole’s still expanding and the economy’s still contracting.

“For the 10th week in a row, the number of people receiving jobless benefits grew,” reported AP.  “It now stands at nearly 5.6 million, the government said – an indication that the labor market is still grim.

“New claims for unemployment benefits rose again as well, to a seasonally adjusted 652,000, up from 644,000 the week before.  The government also said the economy shrank at a 6.3 percent annual clip in the fourth quarter, slightly faster than its previous estimate.”

Yet this was of no concern to the stock market.  Yesterday the DOW jumped 174 points to close the day at 7,924.  Go figure.

Crude Grumblings

Yes, the stock market’s remarkable ups and downs have been the big story of late…that and the latest bailout scheme, congressional hearing, and corporate bonus fiasco.  But drowned out by the noisy hubbub, crude oil is quietly making its way back up the price charts.

“Crude oil for May delivery rose as much as 60 cents, or 1.1 percent, to $53.37 a barrel on the New York Mercantile Exchange,” reported Bloomberg Wednesday night.  “Prices are up 19 percent this year.”

And yesterday crude oil closed above $54 for the first time all year.

Could it be signaling a return to economic growth is just around the corner?

Here’s one opinion…

“Crude-oil demand is set to ‘collapse’ in the second quarter as refiners trim imports for seasonal maintenance, Edward Morse, head of economic research at LCM Commodities LLC, said

“Oil-market fundamentals remain weak,” Morse added.  “They don’t justify $50 barrel.”

Here’s another opinion…

“With global demand in the doldrums and the world swimming in oil, the current price run in oil is an aberration,” said analyst and trader Stephen Schork in his daily oil report.  “We do not think it will last…in a logical world.”

So, from what we gather, demand is weak…yet prices are going up.  Yet, contrary to Schork, we know this is not an entirely logical world.  Rather, we find it to be predictably illogical.  With that in mind… 

Is there something crude oil is trying to tell us, if we’d only pause a moment to listen to its grumblings?

We have a hunch rising oil prices are the early expression of all the funny money that’s been appearing on the scene.  No doubt, we’ll keep you apprised of additional confirmations.


M.N. Gordon
Great Depression Online

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