Real Estate, Pokémon Cards & the 2008 Crash: Borrowed Time

Economist Kevin Nguyen useful popular culture analogy to illustrate a real conversation with his teenage sibling about the US financial crisis, resonates with Bill Watterson’s lemonade stand financing illustrated through his characters, Calvin and Hobbes. This comic strip was produced from c. 1985-1995 showing Watterson’s incredible foresight as noted by tasgall. /

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Nguyen, Kevin. 2008-10-01. “The Financial Crisis, as Explained to My Fourteen-Year-Old Sister.” >> The Bygone Bureau: a Journal of Modern Thought.

Watterson, Bill. 1985-1995. Calvin and Hobbes. http://www.gocomics.com/calvinandhobbes/2008/12/08 Requires login. http://www.gocomics.com/calvinandhobbes

This image is available on Flickr in andresrguez’s album.

Note: I am unsure of the copyright issues here. Bill Watterson has been producing the popular comic strip Calvin and Hobbes since 1985. Calvin and Hobbes, his stuffed Tiger rarely discuss childish matters. Through their imaginary adventures they provide a fresh outlook on the world as it unfolds. The lemonade stand has been a brilliant vehicle for examining the world of finance. I am looking for a web 2.0 outlet for using this image while respecting Watterson’s copyrights.

Virtual Money? $14 trillion lost from world stocks in 2008

The credit crisis erased $14 trillion (McKeef 2008-12-31) from world stock markets in 2008. Where does $14 trillion in world stock markets go? How can that much capital disappear from the market? The infamous year 2008 will be known in the future as the year that fundamental concepts in the moral mathematics of the market were forever changed. This credit crisis was the worst since the Great Depression of the 1930s but its ramifications may be even deeper.

                                                                                                                                                                          
How can we visualize a billion dollars? How much more difficult is it to imagine a trillion dollars?

The most recent wiki entry (2009-01-01) describes how any attempt to visualize numbers higher than a million is complicated because there are too systems of numeric names and the difference between the two scales grows as numbers get larger. Million is the same in both scales, but the long-scale billion is a thousand times larger than the short-scale billion, the long-scale trillion is a million times larger than the short-scale trillion. The short scale system is used in the US and a long scale system is used in the UK. The short scale system of numeric names means every new term greater than million is 1,000 times the previous term: “billion” means “a thousand millions” (10⁹), “trillion” means “a thousand billions” (10¹²), and so on. Long scale refers to a system of numeric names in which every new term greater than million is 1,000,000 times the previous term: “billion” means “a million millions” (10¹²), “trillion” means “a million billions” (10¹⁸). (wiki).”

6 zeros = 1 million, a thousand thousands or (10⁶)1, 000, 000
8 zeros = a hundred million (10⁸) 100, 000, 000 this image
9 zeros = 1 billion in the short scale system used in the US = a thousand millions or (10⁹) or 1,000,000,000
12 zeros = 1 trillion in the short scale system used in the US = “a thousand billions (10¹²) or 1,000,000,000,000
12 zeros = 1 billion in the long scale system used in the UK: 1,000,000,000,000
18 zeros = 1 trillion in the long scale system used in the UK is a million billions (10¹⁸) or 1,000,000,000,000,000,00

1,000,000 6 zeros = 1 million, a thousand thousands or (10⁶)1, 000, 000

This Adobe Photoshop image posted in my ocean.flynn Flickr account was my attempt to visualize 100,000,000 dollars

 “World stock markets ended on an uptick for the year on Wednesday, after some bourses registered their worst annual losses in history. Global stocks as measured by the MSCI world index ended up 0.76 percent for the day and posted their first monthly gain in seven months, but lost 43.36 percent for the year. About $14 trillion (9.6 trillion pounds) in market capitalisation was erased from world stock markets in 2008 in the wake of the worst credit crisis since the Great Depression of the 1930s. “It has been a shocking year, hardly anything was spared in the carnage,” said Michael Heffernan, strategist at Austock Group in Australia. U.S. stocks edged up on Wednesday and saw their first monthly gain in five months, but the year has been the worst for Wall Street stocks since the Great Depression (McKeef 2008-12-31).”

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McKeef, Clive. 2008-12-31. “World stocks end up after historic losses.” Business News. Reuters.

Economics 101: Rewriting the Textbooks

Deborah Yedlin (2008-12-30) of the Calgary Herald’s Business section succinctly summarized the economic nightmare of 2008 in which the investment banking industry collapsed, Chicago school economics theories were debunked and their heroes dethroned, trusted risk management managers were vilified, and the axis of financial power shifted from the West to the East.

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Citations

“The consequences of the lack of regulation in the shadowy subprime housing market, and the ability of banks to get loans off their balance sheets and have investment banks repackage them as rated securities, allowed for the spreading risk. It was a practice that was supposed to ensure if something went bad, the damage would be contained because the exposure would be spread out. It was an axiom that was lent an even greater reliability because U. S. Federal Reserve chairman Alan Greens-pan was a believer in it. As many are now painfully aware, the dominos began to fall when two hedge funds at Bear Stearns collapsed in late 2007. This started the clock ticking on the 84-year-old investment bank, which proceeded to lose the confidence of investors and counterparties and was sold post-haste to JP Morgan Chase in March for $10 a share with the “help” of the U. S. Federal Reserve and its investment banking veteran, Hank Paulson (Yedlin 2008-12-30).”

“Nobel Prize-winning economist Paul Krugman, in opining on the multi-billion fraud perpetrated by Bernard Madoff, suggested one of the reasons he was not discovered was because of society’s worship of the wealthy. Too many, he said, have drawn the conclusion that people who have made huge sums of money must be very smart and to question these individuals would be to insult them (Yedlin 2008-12-30).”

Webliography and Bibliography

Yedlin, Deborah. 2008-12-30. “Storybook year ends in economic nightmare.” Calgary Herald.

NYU sues GMAC’s chair Merkin re:Madoff tie: US bailout GMAC

US Circumlocution Offices [1]: Federal Reserve approved General Motors (GMAC) Financial Services’ application to become a bank-holding company which will let them benefit from government bailout dollars. New York University sued Merkin GMAC chairman for feeding money to Madoff and concealing involvement from investors like NYU.

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Notes

1. Charles Dickens invented the term Circumlocution Offices to describe governmental and bureaucratic indolence and incompetence. By passing work through many hands of the Circumlocution Offices, it is easy to avoid doing anything. Dickens’ character in Little Dorrit, Mr. Merdle, who embarked on a fraudulent scheme is now being compared to Madoff and institutions such as the U.S. Securities and Exchange Commission (SEC), etc are being compared to Circumlocution Offices.

“The U.S. Federal Reserve on Wednesday approved GMAC Financial Services’ application to become a bank-holding company, a status that would give the auto-financing arm of General Motors Corp. access to government bailout dollars and the Fed’s discount window. The move complements a $17.4 billion emergency loan package the government extended to GM and (Wall Street Journal 2008-12-24)…

“Merkin, who is chairman of GMAC LLC, is named in the lawsuit brought by NYU, along with his Gabriel Capital LP fund and Ariel Fund Ltd. GMAC is the finance business owned by General Motors Corp and private equity firm Cerberus Capital Management LP. The Funds ‘feeding’ money to Madoff, including Ariel, made a conscious effort to conceal Madoff’s involvement from their own investors,” the NYU lawsuit said. “This concealment was a requirement dictated by Madoff, which was agreed to by Merkin and other ‘feeder’ funds (McCool Reuters 2008-12-24).”

How to be poor in a rich country

John Dolan’s chilling account of his descent into Dickensian poverty in 2007 in the US in spite of graduate education and teaching experiences, reads like a Gothic do-it-yourself manual.

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Public Policies Keep 16% of Canadians Poor

Judith Maxwell (2008-01-28), former head of the Economic Council of Canada and Canadian Policy Research Networks, claimed that the high concentration of at-risk Canadians live in highly disadvantaged neighbourhoods of poverty by postal code. In 2008 the Canadian national poverty rate remained at c. 16% where we’ve been stuck for eight years. Maxwell claims that religions, some social-minded businesses and countless volunteers who constitute civil society are revitalizing desperately poor neighbourhoods, tackling homelessness and letting governments know that the current policies prevent people from escaping poverty.

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Maxwell, Judith. 2008-01-28. “Forget policy makers, civic leaders are spearheading the fight to end poverty.” Globe and Mail.

Winner’s Curse Effect: Biomedical Research in the Deep Web

Economic principles applied to publication systems for biomedical research reveal a publication bias, a winner’s curse. Elite high-impact scholarly journals continue to raise artificial publication barriers by underusing open access, neglecting negative data and publishing unrepresentative results of repeated samplings of real world. Access to our communal knowledge and memory through archives is essential to the democratic process.

read more Young, Ioannidis, Al-Ubaydli (2008), | digg story

Currently publicly-funded peer-reviewed academic research published in exclusive journals largely informs public policies on biomedicine, the economy, environment, education, justice, housing, etc. These journals now make articles available on-line at exorbitant prices. Contributors to these journals earn tremendous academic capital crucial to professional advancement. Password protection and high costs prevent the public from accessing the most recent relevant and accurate research. The number of publicly accessible sites are growing as search engines dig deeper in the Deep Web and the open access movement grows among some academics and scientists [2, 3].

In this concise, fact-filled, informative article published by the Association of Research Libraries (ARL)[1] (2003-05-04) the authors described how even five years ago librarians were concerned by the mergers in scholarly publishing which reduced the number of players and by rising journal subscription rates that severely eroded the purchasing power[6] of libraries, universities, and scholars requiring crucial publications for teaching, learning and research.

In February 2009 Jennifer McLennan, SPARC’s[5] Director of Communications encouraged all supporters of public access to taxpayer-funded research – researchers, libraries, campus administrators, patient advocates, publishers, and others to oppose H.R. 801: the “Fair Copyright in Research Works Act which was re-introduced in February 11, 2009 by Chairman of the House Judiciary Committee (Rep. John Conyers, D-MI). This bill would reverse the National Institutes of Health (NIH) Public Access Policy and make it impossible for other federal agencies to put similar policies into place.”The bill goes further than prohibiting open access requirements, however, as the bill also prohibits government agencies from obtaining a license to publicly distribute, perform, or display such work by, for example, placing it on the Internet, and would repeal the longstanding ‘federal purpose’ doctrine, under which all federal agencies that fund the creation of a copyrighted work reserve the ‘royalty-free, nonexclusive right to reproduce, publish, or otherwise use the work’ for any federal purpose. The National Institutes of Health require NIH-funded research to be published in open-access repositories (Doctorwo 2009).” HR801 would benefit for-profit science publishers and increase challenges for making the Deep Web more accessible. See also Doctorwo, Cory. 2009-02-16. “Scientific publishers get a law introduced to end free publication of govt-funded research.”

In 2000 The Open Archives Initiative (OAI) [4] focused on increased access to scientific research (Van de Sompel & Lagoze, 2000). Since then it has reached deeper into the Deep Web with is OAI-Protocol for Metadata Harvesting (OAI-PMH). See Cole et al (2002).

Notes

1. In early 2002, Association of Research Libraries (ARL) Office of Scholarly Communication task force recommended that the Association promote “open access to quality information in support of learning and scholarship.” Society benefits from the open exchange of ideas. Access to information is essential in a democratic society. Public health, the economy, public policy all depend on access to and use of information, including copyrighted works.

2. UC-Berkeley Biologist Michael Eisen, Nobel Laureate Harold Varmus and Stanford biochemist Patrick Brown helped start the Public Library of Science, PLoS in 2000, a “nonprofit organization of scientists and physicians committed to making the world’s scientific and medical literature a freely available public resource” by encouraging scientists to insist on open-access publishing models rather than being forced to sign over their (often publicly-funded research) to expensive scientific journals. Wright (2004) cited Eisen, Varmus and Brown as examples of scientists who are making making some areas of the Deep Web more accessible to the public.

3. Alex Steffen (2003 [2008-09-04]) open source (OS) movement

4. The Open Archives Initiative (OAI) “develops and promotes interoperability standards that aim to facilitate the efficient dissemination of content. The OAI Metadata Harvesting Protocol allows third-party services to gather standardized metadata from distributed repositories and conduct searches against the assembled metadata to identify and ultimately retrieve documents. While many proponents of OAI advocate open access, i.e., the free availability of works on the Internet, the fundamental technological framework and standards of the OAI are independent of the both the type of content offered and the economic models surrounding that content (ARL).”

5. The Scholarly Publishing and Academic Resources Coalition, (SPARC) launched in June 1998, is an international alliance of academic and research libraries working to correct imbalances in the scholarly publishing system.

5. SciDev.Net (Science and Development Network) “is a not-for-profit organisation dedicated to providing reliable and authoritative information about science and technology for the developing world. Through our website www.scidev.net we give policymakers, researchers, the media and civil society information and a platform to explore how science and technology can reduce poverty, improve health and raise standards of living around the world. We also build developing countries’ capacity for communicating science and technology through our regional networks of committed individuals and organisations, practical guidance and specialist workshops.” SciDev.Net “originated from a project set up by news staff at the journal Nature (with financial assistance from the Wellcome Trust, United Kingdom) to report on the World Conference on Science, held in Budapest in 1999. This was warmly received, leading to discussions about creating a permanent website devoted to reporting on, and analysing the role of, science and technology in development. The initiative was endorsed at a meeting held at the Academy of Sciences for the Developing World (TWAS) in Trieste, Italy, in October 2000. Immediately following the Trieste meeting, the UK Department for International Development (DFID) agreed to finance a six-month planning stage, starting in November 2000. At the end of this planning stage, sufficient funding had been raised from international aid agencies and foundations for a full-time staff and an independent office in London. The SciDev.Net website was officially launched on 3 December 2001. The website has expanded continuously since its launch. We regularly add dossiers, spotlights, ‘quick guides’ and ‘news focuses’ on specific subjects, in addition to a growing amount of regular news coverage. An enhanced and redesigned version of the website was launched in January 2008. Regional networks were launched in Sub-Saharan Africa (2002), in Latin America (2003), in South Asia (2004) and in China (2005), each bringing together individuals and organisations that share our goals and objectives. There are plans for future networks in the Middle East and North Africa, West Africa and South-East Asia. SciDev.Net held its first workshop, in collaboration with the InterAcademy Panel, on science in the media in Tobago in February 2001. Since then we have collaborated with partners to deliver numerous specialist science communication workshops for journalists and other professional communicators across the world (SciDev.Net History).”

6. “Expenditures for serials by research libraries increased 210% between 1986-2001 while the CPI increased 62%. The typical library spent 3 times as much but purchased 5% fewer titles. Book purchases declined by 9% between 1986-2001 as libraries sought to sustain journals collections. Based on 1986 purchasing levels, the typical research library has foregone purchasing 90,000 monographs over the past 15 years. In the electronic environment, the model has changed from the purchase of physical copies to the licensing of access. In general, libraries do not own copies of electronic resources and must negotiate licenses (rather than depend on copyright law) to determine access and use. Large bundles of electronic journals offered by major commercial publishers will force smaller publishers out of business. Multiple-year licenses to large bundles of content that preclude cancellations will force libraries to cancel titles from smaller publishers to cover price increases of the bundles. This diminishes competition and increases the market control of the large publishers. Lack of corrective market forces has permitted large companies to reap high profits from publishing science journals. In 2001 Reed Elsevier’s STM division’s operating profit was 34% while its legal division’s operating profit was 20%, its business division’s 15%, and education 23%. Mergers and acquisitions increase prices and eliminate competition. Research has shown that mergers exacerbate the already significant price increases of journals owned by the merging companies. While there were 13 major STM (Science, Technology and Medicine) publishers in 1998, only seven remained by the end of 2002 (ARL 2003-05-04:2).”

Webliography and Bibliography

Cole, Timothy W.; Kaczmarek, Joanne; Marty, Paul F.; Prom, Christopher J.; Sandore, Beth; Shreeves, Sarah. 2002-04-18. “Now That We’ve Found the ‘Hidden Web,’  What Can We Do With It?” The Illinois Open Archives Initiative Metadata Harvesting Experience. Museums and the Web (MW) Conference. Archives and Museums Informatics. University of Illinois at Urbana-Champaign, USA. April 18-20.

Smith, Richard. 2008-10-07. “More evidence on why we need radical reform of science publishing.”

Steffen, Alex. 2008-09-04 [2003]. “The Open Source Movement.” WorldChanging Team.

Young, N.S,; Ioannidis, J.P.A; Al-Ubaydli, O. 2008. “Why Current Publication Practices May Distort Science.” PLoS Medicine. 5:10.

ARL. 2003-05-04. “Framing the Issue.” Association of Research Libraries (ARL).

It’s providential: the Lord’s prayer in Ontario legislature

On June 12, 2008 in Toronto, Ontario MPPs voted unanimously to maintain the traditional Lord’s prayer but will add a moment of silence for non-believers and a rotation of Buddhist, Hindu, Islamic, Jewish, Baha’i, Sikh and First Nations’ prayers to ensure that public institutions reflect modern values and beliefs (choices based on Ontario census).

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Artifacts of prehistoric beach party uncovered in Banff, AB

A July 2008 archaeological dig at an endangered site uncovered the richest, most prolific cache to date of c. 5000 artifacts from several cultures proving that Banff’s rich concentration of natural resources like wild game, edible plants and the famous hot springs, attracted (not repelled as was argued) nomadic peoples for at least 7,000 years.

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In July 2008 Parks Canada archaeologists Bill Perry and Brad Himour during a month-long archaeological dig at an endangered, rare site located west of the town of Banff, excavated 1% of the potential 30,000 square metre site (eleven pits) and uncovered Banff National Park’s richest, most prolific cache to date of thousands of artifacts some dating back 7,000 years, belonging to the Besant, a Plains nomadic civilization previously thought to have avoided the mountains and living mainly on the prairie, had in fact regularly passed through this mountain paradise. Perry says. “On the eroding slope face we’re finding flakes, fire-broken rocks and projectile points. A lot of important information will be lost if we don’t do some salvage excavation.” This site is part of a kilometre-long chain of potential archaeological sites. Although Parks Canada has a dedicated fund for threatened archaeological sites, funding operates on a case-by-case basis, giving priority to culturally sensitive areas at risk from erosion, says Parks manager of cultural resource services Gwyn Langemann. This rich source of knowledge was first threatened in the 1880s when the railway undercut the slope where the excavation sits. “Throughout Western Canada, modern archaeology is only just beginning to scratch the surface when it comes to piecing together early human migration paths. Debate still rages on how long ago glacial ice receded from the Bow Valley, opening up the corridor for nomadic travellers. What is known is that human inhabitation in the Banff area extends back at least 11,000 years, with the oldest site in the area at Lake Minnewanka. That site, exposed only a couple months each year and otherwise submerged beneath the lake’s fluctuating waterline, is also at risk from water damage. Much is still being learned about early settlement in the Rocky Mountains, which were originally viewed as a barrier to migration – a harsh and inhospitable place that divided Western Canada’s early civilizations. Bill Perry claims that since the 1980s archaeologists have reversed their knowledge claims on human settlement history and early human migration paths in which they had argued that the Rockies were a barrier to plains people migrating further west – a harsh and inhospitable place. Using modern archaeological methodologies they have found undeniable evidence showing that Banff valley region rich concentration natural resources like wild game, edible plants and the area’s famous hot springs, attracted nomadic peoples. Its prime campsites and travel corridors remain similar to what they are now. “With the valley’s current vegetation little more than a century old, it was once home to broad meadows and open, grassy Plains that played host to grazing bison.” “Debate still rages on how long ago glacial ice receded from the Bow Valley, opening up the corridor for nomadic travelers.”

Perry describes the site as a “prehistoric beach party”, evidenced by ancient fire pits and cooking sites. Roughly dated by the technology used, nearly 5,000 artifacts have been found, indicating several cultures passed through the area between 7,000 and 500 years ago. Although there is no known link to modern day aboriginal cultures in the area, both Stoney and Blackfoot oral histories connect them with the Bow Valley, while the Kootenay and Shuswap crossed the pass to hunt bison here. “It’s an amazing deposit of fire-broken rock on this ledge,” Himour says. “It’s going to definitely add to the conversation about the Besant occupation of the park.” Artifacts will be catalogued and inventoried over the winter, with carbon dating test results expected next spring. Perry hopes funding will continue, allowing ongoing exploration of the culturally important area. “At best all you can hope to do is get enough money to get a sampling of what’s here. Archaeology is an expensive business,” he says (Follett 2008-08-07).

Follett, Amanda. 2008-08-07. “Dig indicates Plains culture spent significant time near Banff.” Rocky Mountain Outlook.

Oil commodities hedge fund speculator is anything but “passive”

Ross Levin, a NYC hedge fund analyst with Arbiter Partners, who calls himself a “passive speculator in securities” met Lionel Lepine, a member of the Athabaskan Chipewyan First Nation whose family and friends living on the contaminated watershed upriver from the oil sands’ effluence are suffering from unprecedented numbers of cancerous tumours.

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A number of recent stories intersect here: Harper’s apology for past treatment of Canada’s First Nations, the pollution of the Athabaskan River north of the oil sands, the impatient development of nonrenewable resources, the meteoric rise of oil commodities market directly caused by irresponsible speculators playing with volatile, unpredictable hedge funds that play havoc with the market making a fortune for some while destroying economic, social and ecological environments all around them.

In a rapid visit to the local library yesterday I grabbed Jake Bernstein’s How the Futures Markets Work. Although it is quite old for the fast-paced risk management industry, there are certain fundamentals that ring true. He briefly traced the history futures contracts leading to the volatile environment where agricultural futures were replaced by the less predictable currency markets. Of course, his book was written long before the meteoric rise of private equity funds.

My concern remains with the absent ethical component on trading floors. Ethical responsibilities are as elastic as the regulations that govern the centuries old practice of hedging. In the period of late capitalism and the emergence of risk society, the cost of destructive unintended byproducts have created havoc in ways that far exceed the commodities/service value. The road to profits and impatient money, is paved with casualties.

Berstein’s facts of market life are telling. He encourages simple methods and systems which require few decisions and little mental conflict. Too much thought is not conducive to successful trading. Too much analysis costs lost opportunities. Keep systems simple. Control your emotions. Practice caring less so that you remain more objective. Don’t ask why. Knowing why may hinder you more than it will help you. Patterns are the best indicators available (What feeds into a “pattern” however is not a science). Timing is what makes money in the futures market (Bernstein 2000:282-3).

In other words, futures’ gurus encourage young hedge fund analysts to not think too much about factors such as displacement of peoples, the degradation of living conditions and the way in which they unwittingly contribute to making vulnerable ecologies and peoples even more vulnerable. Their gurus tell them to not think about the impact of their actions. They are told to not ask why the prices of essential commodities like fuel and food that they are playing with, are pushing certain groups into unimaginable levels of social exclusion. In the end groups at-risk to health degradation are always those least able to protect themselves. How convenient that the gurus do not factor in these social issues. They are entirely absent from finance reports.

But then a lot of information is purposely not included in financial and business reports. Bernstein argues that the simpler systems that take fewer things into consideration will lead to more profits. Yet when he lists off all the potential factors in operation in even a simple fundamental analysis, it is not at all simple. It begins with the highly complex. The algorithms involved may appear to be simplified through the use of databases that seem to generate accurate, objective hard facts. In reality, the accuracy of any query depends on what was fed into it.

Futures trading, also known as commodities trading, the final frontier of capitalism, became a popular speculative and investment vehicle in the US in the 1960s (Bernstein 2000:1). These financial instruments offer unlimited profit potential with relatively little capital. Speculators are drawn to the possibility of quick money or what I like to call impatient money. The great wealth accumulated from speculative financial instruments has spawned careers in brokerage, market analysis, computerized trading, computer software and hardware, accounting, law, advertising which themselves subdivide into more recent opportunities such as those related to risk-management.

While gurus such as Bernstein argue that gambling is for anyone but speculation is for professionals, the chaos and unpredictability of the current global economy have been linked to a growing culture of gambling in futures trading rather than level-headed professionalism. Gamblers create risk simply by placing a bet; professional speculators “transfer risk from the hedgers to the speculators” and it therefore called risk management instead of gambling.

“It rained last night so the price of soy beans will be down today.” Although the basis of fundamental analysis in economics is supply and demand, the actual fundamental analysis of specific markets that might generate accurate price predictions are complicated as numbers of factors overlap and massive quantities of data need to be considered. The simple equation involves how much of a commodity or service are buyers willing to pay at a given time and place. There used to be a correlation between price and consumption. Factors that impact on price of commodities include the state of the economy (local, regional, national and international – inflationary, recessionary with rising or falling employment), availability of alternate products or services, storage possibilities, weather, seasonality, price cycles, price trends, government subsidies, political influences, protectionist attitudes, international tensions, fear of war, hoarding, stockpiling, demand for raw materials (sugar, petroleum, copper, platinum, coffee, cocoa), currency fluctuations, health of the economy, level of unemployment, housing starts. Most technical systems are not effective in making traders money.

In spite of this there is still a persistent belief that there is an invisible hand that guides market correcting imbalances like a living organism or finely-tuned machine.

“Markets work perfectly as they respond to the multiplicity of forces that act upon them. It is our inability to find, parse, and correctly weight the impact of these factors that limits our results and success of our fundamentally based forecasts (Bernstein 2000:162).”

The bottom line is that wealth disparities continue to intensify and that these inordinate extremes of wealth and poverty destabilizes society. These distorted economic relationships deprive us of any sense of control over economic forces that threaten to disrupt the foundations of our existence. National governments have been either unwilling or unable to deal effectively with this situation in which we live where the deplorable superfluity of great wealth exists alongside the acute suffering of those living in miserable, demoralizing and degrading abject poverty even in countries like Canada.

Social equality is an entirely impracticable chimera. Even if equality could be achieved it could not be sustained. Wages and income should be unequal and should correspond to different efforts, skills and capacities. However, equal justice for all is not only necessary but urgently needed.

As long as those involved in the financial and energy industries remain in denial of their role by hiding behind economic and ideological polemics and simply dismissing concerns from others there can be no productive change. A fresh look at the problem should involve people like Lionel Lepine who are directly involved with decisions, along with experts from a wide spectrum of disciplines. There will not be a voluntary ethical turn so for now we desperately need public policies that will regulate industries.

Selected Timeline of Critical Events

1710 The first modern organized futures exchange began with the Dojima Rice Exchange in Osaka, Japan. The Japanese feudal landowners began to use certificates of receipt against future rice crops. As these futures certificates became financial instruments in the general economy the value of the certificates would rise and fall as the price of rice fluctuated. The Dojima Rice Exchange emerged as the world’s first futures market where speculators traded contracts for the future delivery of rice or “certificates of receipt.” The Japanese government outlawed the practice when futures contracts (where delivery never took place) began to have no relationship to the underlying cash value of the commodity leading to wild and unpredictable fluctuations (Bernstein 2000:30).

1848 The Chicago Board of Trade (CBOT) was formed as a price risk occurred in the grain markets of Chicago.

1865 The Chicago Board of Trade (CBOT) organized trading of futures contracts.

1919 – 1945 The Chicago Mercantile Exchange (CME) traded futures in eggs, butter, apples, poultry and frozen eggs (Bernstein 2000:70).

1960s Futures trading, also known as commodities trading, the final frontier of capitalism, became a popular speculative and investment vehicle in the US in the 1960s (Bernstein 2000:1).

1970s There was increasing volatility in international currency exchange rates as the Bretton Woods agreement began to break down. Business people transferred risk of volatility in international markets by hedging with speculators willing to take the risk. Futures markets began to expand into foreign currencies as fluctuated wildly competing against each other and the US dollar.

1972 The total volume of futures contracts trading was 18 million and the top ten most actively traded future contracts were agricultural futures (Bernstein 2000:71).

1974 The US Congress passed the Commodity Futures Trading Commission Act and established Commodity Futures Trading Commission (CFTC) to protect participants in the futures market from fraud, deceit and abusive practices such as unfair trading practices (price manipulation, prearranged trading, trading ahead of a customer), credit and financial risks, and sales practice abuses (Bernstein 2000:32). Individual nation states have similar regulating bodies.

1982 Futures trading in the US was self-regulating and anyone in the business had to become a member of the National Futures Association (NFA).

1986 The total volume of futures contracts trading was 184 million and the T bonds were among the most actively traded future contracts (Bernstein 2000:71).

1990 The price of crude oil rose dramatically when Hussein invaded Kuwait.

1999 The most actively traded future contracts were interest rates, futures, stock index futures, energy futures, currency futures and agricultural futures (Bernstein 2000:72).

2000 The Chicago Mercantile Exchange (CME) trades futures in livestock futures, currency futures, interest rate futures, stock index futures (Bernstein 2000:70).

2000 More than 90 foreign futures exchanges emerged with the ever-increasing demand for new financial instruments “to hedge against fluctuating interest rates, changing foreign exchange rates and institutional securities portfolios (Bernstein 2000:46).

2008 Calgary has a high percentage of young millionaires with lots of disposable income. There are also c.4000 homeless people in Calgary, the oil capital of Canada. c. 40% of the homeless are working poor who are unable to afford housing.

Webliography and Bibliography

Bernstein, Jake. 2000. How the Futures Markets Work. New York Institute of Finance.

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