Tea Party and the Right  
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Matt Taibbi on Deluded Tea Partiers, Ayn Rand and How the U.S. Is Like the Soviet Union

Every country has scam artists, but only in a dying country are they part of the power structure.

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MA: You’ve counted several bubbles in this book, including the Internet bubble, the housing bubble and the commodities bubble. How do you see the commodities bubble affecting consumer prices?

MT: In 2008 everybody remembers that gas prices went through the roof. That was what started this book is because I was at a McCain campaign event and he was giving that “drill baby drill” speech, and the reporters afterward were joking, “McCain, what a moron, as though this was what caused gas prices to go up, that we weren’t drilling in the Gulf of Mexico.” I said, “Well, do we know why gas prices are going up? I don’t know what causes it.” It turns out that it’s very complicated. It goes back to this problem of [deregulation]. They had a tightly regulated system in which most of the people who were buying and selling commodities had to be physical hedgers, according to the law, which means you are either physically producing or physically consuming oil or gas or soybeans or corn. Only a small percentage could be speculators, because you didn’t want speculators buying up the whole corn market and then dominating the prices.

But starting in the early ‘90s, a lot of companies went to the government and got exemptions to these rules. So over the course of about 10 or 15 years, the amount of speculative money in the market started to balloon. In 2003, there was $13 billion dollars worth of speculative money in commodities. By 2007 it was over $300 billion. That money was betting on the price of oil and corn to go up. And they did. Every single commodity saw a price increase in that four-year period, the average being 200 percent. It was a speculative bubble.

MA: You connect Goldman Sachs to these bubbles.

MT: Oh of course, Goldman was right in the middle of the commodities market. If you buy and sell commodities, you’re probably doing it on the Goldman Sachs commodities index. They are a major commodities trader. They were the first company to get one of those exemptions. Their subsidiary got the first one, and Goldman that was telling the entire world that oil was going to go up to $200 a barrel in 2008. It never got that high, but it did get to $149, which was, according to people I talked to, at least three or four times what oil was actually worth. Most people thought it was a supply and demand issue, but supply was up that year and demand was down and none of this was reported in the media.

MA: So we have systemic problems and the public is not getting the information to understand them. Politicians are not really educating the public about these things, and they are bailing out the companies that have acted badly. The media, too, are not really informing people, so it seems that many in the public are left with a simplistic understanding, rather than seeing the systemic issues and solutions. What do you see as the big solutions? What kind of impact would, say, campaign finance reform have?

MT: I think that’s absolutely true, and Arianna Huffington’s book has a section in it where she talks about how, on these issues, on this Wall Street stuff, Ted Kaufman from Delaware was the best guy in the Senate on all these issues. He was absolutely aggressive on everything from too-big-to-fail to high-frequency trading. And it’s not a coincidence that he didn’t run for reelection. What set him apart from everybody else was that he did not have to raise money. Because the financial services industry is the number one source of money for politicians, I think [campaign finance reform] would be a great place to start, if you were going to talk about what we can do. I mean there isn’t a whole lot we can do, but that’s one thing that would actually have at least a little bit of a concrete effect. It wouldn’t solve everything because even if you fixed the campaign contribution rules, a lot of these guys are going to go and work as consultants to Citi Group or Goldman Sachs after they leave office and that’s always going to be a temptation, but at least it’s someplace to start.