by Special Correspondent TS DeHaviland
We hear a lot about the “wisdom of the market” these days, especially from neo-con free-market zealots posing as savvy 30-something hipsters. But with oil at $126 a barrel on nothing more than speculation, we see further evidence that the market is not wise at all: it is short-sighted and flighty, idiotic, bullheaded, and daft. $126 a barrel oil simply ignores current supply and demand, with relatively high production and declining demand in the US of A. It rose this high first on what journalists called “jitters,” as if the traders had had too much caffeine. Actually, they were acting like spooked cattle in response to the distant thunder of the Bush administration’s threats of war with Iran from a few months back. (Could it be this is part of the president’s and vice-president’s retirement plan? But that would be too cynical a postulation.) The market responds to pressure with the same lack of rationality and bandwagon mentality that leads to the mediocrity that is American Idol.
By this point, of course, it’s buoyed up by that speculation: there’s money to be made in them thar irrational behavior, and so traders bid the price up higher hoping to dump it at just the right time. This is from the same generation of traders who seem to have learned nothing from the housing bubble and the tech bubble and biotech before that. Some of them may even be old enough to recall the collapse of savings-and-loans in the ‘80s. Thus their behavior is even less that irrational: it’s bordering on criminal since their actions lead directly to the suffering of millions, in this case millions who can’t afford food anymore because it costs too much to grow and transport.
Beyond this, the mere fact that we’re still trading in oil in the first place is a good indication of the lack of market wisdom, as we’ve known for 30 years that there’s simply no future in oil since it’s a finite resource and we’ll run out of it sooner or later. Granted, there’s plenty to be made in the meantime, but you can make a short-term bundle by liquidating all your household goods and living in a cardboard box too, and I don’t see many traders doing that. A wise market would have acknowledged the inherent risk in investing in alternatives a long time ago, but would have plunged ahead anyway because the alternative is riding out a dwindling resource until there’s no market upon which to trade at all.