Rapidly losing luster...

My wife's obsession with this wedding is getting old, fast. I was just expect (can't really say forced, I guess) to sit through the entire 3 hour BBC coverage of the event AGAIN, beginning to end. Katie is due home from work at 10 PM, so I'm sure the fun will begin all over again... but without me, this time.

It was a spectacular event, and I have to say that I think it is flat out AMAZING that this sort of pageantry and pomp is STILL so frigging popular in England, and (by extension) the entire world. I am surprised at the 2 billion viewers, but I have no doubt it is probably true. After all, Diana was THE most recognized face alive, second only to Jesus Christ (not physically present for the last 2000 years) and Mohammad Ali (not dead, but out of the camera's eye since the Olympic Torch lighting ceremony). The British Empire spanned the globe, holding and ruling territory on every continent, and reigning over 1/5 of the world's land mass right up until the last century... so the connection with the monarchy isn't that far away for people in Egypt, India, Ireland, North and South America, Africa, and Southeast Asia. William (and his grandmother, of course) are related by blood and marriage to at least 11 of seventeen European monarchies and royal houses, and Elizabeth II still reigns as Sovereign Queen over the entire Commonwealth of Nations, which all by itself constitutes 53 separate and individual nations.

For example, in his book 1776, David McCullough describes in his opening chapter the procession of HRM King George III as he made his way from St. James Palace to Westminster (a route almost identical to the one followed by William this morning) to open Parliament. The crowd that was documented had stood in the morning quiet for hours, ten and fifteen people deep, just for a glimpse of the King as he rode past in his massive gilded carriage. They cheered and waved gloves and kerchiefs as he rumbled by, and the people who saw him remembered it and wrote about it the way Ryan recalls shaking hands with President Clinton. That was only for a bi-annual opening of Parliament, and not for a once in a generation regal event like this wedding... yet it sounds remarkably similar in scope and impact as this event was today.

Think about it... 500,000 people standing in the dark (some for more than 24 hours) just for a first-hand view of that kiss on the balcony of Buckingham Palace? I don't think so. It was for the sense of unity... of being part of a more than 1,000 year tradition that connects each and every citizen of the United Kingdom, where as we (here in America, I mean) simply watched.

On the second viewing of the ceremony, I heard the Bishop of London give a sermon to William and Kate in which he quoted both Milton and Chaucer, and I pointed out to Liz that both those men, along with dozens of other famous authors, poets, musicians and artists, are actually lying in rest immediately behind the ambo from which he was speaking! Pope, Shakespeare, Milton, Browning, Dickens, Handel, Tennyson, Longfellow, Yeats, Scott... all resting peacefully just a few feet from the apse of the cathedral. THAT is the kind of connection these people are enjoying with their collective, mutual national heritage when they celebrate these sorts of events.

The genius of the British monarchy (and I am using the classic definition of that word... the driving spirit that brings success... not an over-abundance of intelligence) is that it is now separate from the government. The PM and the Cabinet can fail utterly, the House of Commons can degenerate into a brawling bunch of hooligans (which it has periodically)... but the Royal Family is untouched by all that. Just as when someone in the Royal Family does something stupid (dressing like a Wermacht officer in the Afrika Corps for Halloween, for example), it is little or no skin off the PM's nose, either.

The government keeps things running... but the image of the United Kingdom, and specifically England, is the Monarchy and the Royal Family. They represent an unbroken line back to 1066 and the Conquest by William I. In fact, I think it is more than a coincidence that, come the 1,000th anniversary of the Conquest, there is every chance that another William will be sitting on the throne (William V)... and we can say we saw the boy get married in 2011.

Cry 'God for Harry, England and St. George!

"The Royal family has a real knack for learning from past mistakes, doesn't it?"

Ummm, no actually. They don't. Unless you mean to describe only very recent history. War of the Roses, France, Scotland, the Magna Carta's in, no wait it's out, hold on a tick it's back in. Lancaster rocks, no the Yorks rule, Lancaster, York, York, Lancaster, and lets not even get started with Ireland. These people's learning curb is measured in centuries ... and by the way, I love it all. I'm just saying, perhaps this monarchy isn't the best standard for "learning from past mistakes", that's all.

Tell ya' the truth, I'm a little disappointed. I thought I'd be more interested in this historical event (and by definition that's what it is) for having been viewing that Monarch series on Netflix at least semi nightly for some time (from Egbert to Henry VIII thus far). And I think I know why I'm not that interested. I like my Royal events a little more messy. I know for a fact that this wedding will not result in any beheadings. It wont casue any standards to be unfurled on the field of battle. No struggle for ascension. No great houses wiping each other out. No condemnation to the Tower. Just Shepard Smith noting there was "no tongue" in the royal kiss... Doesn't quite measure, up does it?

In flipping through the channels this morning msnbc had a scroll at the bottom which noted that 2 billion people watched the wedding today. Really? That's a full one-third of planet earth. That seems a bit over estimated if you ask me. Are people in Sierra Lione really looking down their morning to-do list going: "Ok, avoid rape gangs, check. Try not to have limbs amputated by machete, check. See how long the trail is on Kate Middleton's dress, check. Don't get infected by AIDS on the way to the well, check." Seriously, 2 billion? That's more than the Superbowl and World Cup, combined. I don't know, maybe I'm wrong.

I will say this though, 3 things actually. 1) I am a HUGE fan of the history of the English throne. It's perhaps 0.0001% of the US population that can explain the difference between England, Britain, Great Britain, and the United Kingdom (and I can), so don't think this is Anglo-Norman bashing, because it's not. 2) Prince William does give off an air of confidence (allow me a slight aside here). He has a presence, as Titus noted, that is the film negative of his father. And the English tend to have a history replete with that - the son being the negative of his father, for good or bad. In such instances that the father was weak, diddling, or obsessed with minutia, the son is typically a big picture leader; a war king; and physically impressive. And that's what William is. Think about that for a second. Even during the Middle Ages (just to pick a period), before photographs, television, or any other widely disseminated image, the level of support and respect the English King received from his subjetcs tended to be in direct correlation to his physical attributes. An athlete, a good hunter, a warrior. These were the expected characteristics of an ideal English King. They ruled through force of personality. And although that's true for many a monarch and emperor throughout history, I think it's a particular characteristic of the people whom would dare enforce limits on their monarchs (i.e. the Magna Carta). Even if the Crown was your birthright, their respect wasn't. You had to earn that on your own. And William is all of those things. He has that Edward III or Henry V feel to him. I have no doubt were it centuries prior he would be on horseback at Harfleur ... and that Charles would not.

I almost forgot, #3! And this is most important, above all it's why this wedding is getting world wide wall to wall coverage, and is perhaps the thing that is nearest and dearest to my heart: Kate Middleton is SMOKIN' HOT! Period. And I mean she could be in the next Transformers movie type of hot. Well done William ... it is good to be the King.

Say what you will...

The Royal Family has a real knack of learning from past mistakes, doesn't it?

William is just about everything that Charles wasn't. He shows real poise and maturity, where Charles was routinely shown to be an awkward, stuttering goof. While I can readily see the similarities between Andrew in the 1980s and Harry in the second decade of the new century... William is a complete Royal... where Charles was not.

Interestingly enough, Liz keeps making comparisons to the 1947 wedding of Elizabeth and Phillip. Coming on the heels of WWII and the devastation suffered by London and the whole of England during the Blitz, the wedding was seen as a real "revival" of English pride and honor... and I can't help but agree with her. All the trash thrown out over the last 30 years about the Royal Family and the British Monarchy by the tabloid press might now become real admiration, and I really don't think that would be a bad thing.

I mean, imagine a little national pride and media prominence of a monarchy in an era such as the one we are living in now when multinational organizations like the UN and the EU are doing all they can to bring down national, ethnic and dynastic (as well as very historic) institutions.

I think that would be a very good thing, myself.

Guilty...

I have fallen victim to the Royal Wedding... watching it almost non-stop all morning. It is fascinating watching a process that hasn't change in any substantial manner in nearly four hundred years, and in a place that has seen nearly every royal wedding since William Rufus.

I remember watching Charles and Di's wedding, and thinking that I would live to see that man ascend the throne... and now, thirty years later, watching another and thinking the same thing. Both Liz and I are convinced that Charles will not take the throne, and that William will become the first Monarch since Queen Anne to claim descent from the Royal House of Stewart (Diana was descended from Charles I and Charles II through her Spencer family line), as well as the Royal House of Windsor.

It's amazing what you can learn watching a wedding, isn't it?

A new role for atheism...

I found this article during my morning coffee, and it is simply so unbelievable that I had to share it.

Atheist chaplains in the US military? Tax payer funding for military organizations that disseminate literature expounding the virtues and values of atheism?

I find it impossible to imagine how an atheist could hope to "minister" to a dying soldier, looking for comfort and solice in his last few moments of life, with no possible connection between the two should the wounded man be a Christian. What could he possibly say? "Don't worry, it will all be over soon... nothing to worry about once you close your eyes, since there's nothing to come anyway."

I keep thinking of that old saying we've all heard thousands of times: "There are no atheists in foxholes." It is undoubtedly true, too... when death and destruction are literally milimeters away from you and anything from an ounce of lead to 2500 lbs of high explosives could erase your physical existence completely, who DOESN'T want to think that there might be something more to all of this then what we can see, smell and touch right now?

I swear these guys seem to think that the role of a chaplain is to spread the word of God to those that don't want to hear it, rather than to minister to those that already believe and are looking for spiritual and moral guidance in times of trouble and tribulation.

The most highly decorated chaplain in US Army history was Father Francis Duffy, military chaplain to the 165th US Infantry Regiment (formerly the "Fighting 69th" from New York), who won distinction and military recognition for his service during WWI. He was even considered for regminetal command by Douglas McArthur himself... but not because of his ability to "fight" (which he had, of course) but because of his ability to lead and mentor his men into such an effective fighting machine. This he did (by his own words) with his faith far more than with his fist.

What would an atheist use, when the first thing they admit to NOT having is faith?

I've said it before...

... but it's worth saying again:

What you lack in quantity, you make up for in quality.

I think its important to point out that the "gold standard" you referred to as having been removed in 1971 wasn't the system of gold bullion-backed dollars. That system of currency ended with the establishment of the Federal Reserve, and all the gold ever mined in all of human history couldn't back the number of US dollars in circulation right now. The "gold standard" that Nixon ended was the Federally mandated and controlled price of gold on the US commodities exchanges. If I'm not mistaken, it was $39.50 from before the depression era all the way to '71 with no variation or change.

Backing our currency with a commodity might not help, anyway. Even if we reduced the number of dollars in circulation, or revalued them to where they actually reflected US gold deposits, as long as the price of gold remained unfixed... the value of the dollar is as likely to rise and fall as gold. Not much is gained there, is it?

Not to drag the point on, though... your essay was excellent, and covered all the ground very very well. Nicely done, sir. What is so glaringly painful for anyone to see in all of this is that it is going to get much worse before it gets any better, no matter the affiliation of the man sitting in the Oval Office. I'm not sure were at the same point as the Weimar Republic, mind you... but you can bet your bottom dollar (if you'll pardon the pun) we haven't seen the worst that inflation can do yet, either.

I tell you, this is a bear to get your arms around...

“Leon Hess, whose oil company made more than $200 million by trading oil futures during the Persian Gulf crisis . . . said he longs for the days when oil company barons could get together and decide prices and supply levels largely among themselves, rather than depending on the violent price swings created by traders who react to rumors and headlines.

“‘I’m an old man, but I’d bet my life that if the Merc [New York Mercantile Exchange] was not in operation there would be ample oil and reasonable prices all over the world, without this volatility,’ Hess said at a hearing the Senate Committee on Governmental Affairs held on the role of futures markets in oil pricing.”

-- “Oil Baron Longs for Past, Not Futures,” Newsday, November 2, 1990

Now bare in mind, he was railing against the instability and volatility on the traditional exchanges. I can't imagine what he'd say about OTC markets.

Few times have I had to do this much research to discover simple truths about a subject. And, all modesty aside, if I (and by extension the 2 of you) find this challenging work, what chance does the average person whose passions do not lie in discovering such things have?

Each night recently, work or no, I've been watching a series entitled "Monarch", via Netflix. It is 2 parts, approximately 6 1 hour episodes per part, starting at about 450 AD with the Anglo settling of Britannia. I'm up to Henry VIII, he just married Catherine of Aragon. And I'll tell you what, I'd sooner be tasked with reciting from memory the precise line of succession, with all the Edwards, Richards and Henry's, then to pursue this further. But I will anyway, because it's important.

Titus, the question you stumbled upon (or rather I stumbled upon) is more profound then I could have possible imagined. You asked if crude oil could be purchased in currency other then the USD on these OTC exchanges. In researching this, it all came together for me.

First, let me back up. My source for much, not all, but much of this post was an exhaustive study done by Houston, Texas Bauer College of Business, or "UH." It is a fantastic source, itself source cited out the wazoo,and section III, which you can find HERE, is a 49 page dossier on the crude futures market, including extensive discussion on OTCs. The only problem is it's from 2003. However, the they did their best to address the issue in layman's terms, and it is bearable (for the most part to read). Knowing that it is dated means you need only know that every number presented has since exploded. I got through the first 27 pages before I had to stop, for a little thing called life, and get this post up before my day's "to-do's" went undone.

Now, understand first that OTC's existed prior to Clinton's 2000 Act. They were limited though because ti was a grey area of oversight. Participants didn't know if CEA, the SEC, etc rules covered these innovative transactions. As technology increased - primarily the web - these these OTC's grew in number. Enter the 2000 Act meant to clarify the oversight - and boy did it. Between the electronic technology to instantly connect parties and the Act which unleashed these parties like Tom Cruise racing to stake his land in far and Away, these things exploded.

These transactions between private parties that formally took place on organized exchanges, became so popular that what I call "semi-organized" exchanges emerged to service them. They're like a dating website. See, the traditional exchanges (say, the Chicago Mercantile Exchange) involve set fees, regulation, disclosure etc. They're intrusive (in comparison) and more expensive then conducting OTC's. But how to meet these other parties whom wish to avoid the traditional costs and sunlight? Well, enter ICE. No, not the immigration task force, but the but the International Exchange. From the UH study:

"...in 2000, several investment banks and oil companies formed the Intercontinental Exchange (“ICE”) to trade in OTC energy and metals derivatives. Located in Atlanta, Georgia, the ICE is an electronic exchange open only to large commercial traders. Rather than provide a counterparty to all trades, as do the NYMEX and IPE clearinghouses, ICE acts only as a posting facility for bids and offers, which the traders can then choose to accept or reject. Any large commercial company can trade on ICE’s facility without having to employ a broker or pay a fee to a member of the Exchange. All trades are bilateral deals between the buyers and sellers. There is no clearinghouse and, accordingly, no requirement to post margins. The ICE website advertises: “There are no memberships. No artificial restrictions. No dues or fees beyond those incurred in the trading itself.”

And there's another clearinghouse based in Dubai. And think about it, why do business on the traditional Mercs when you can do business much cheaper and more efficiently on these "semi-organized" exchanges?

Now enter your question Titus. Can you purchase oil contracts with funds other then the USD. I looked at this for hours this morning. And I have to conclude "yes." I could not find a direct standard on these ICE style exchanges, but I soon realized that was because their are none. AS the report makes clear, they just advertise the offer, you do the rest. They could be paying for them in pixie sticks for all anyone knows, let alone the Sterling. What we can know is that at some point the crude was bought with USD. It had to be. That's the deal we cut with OPEC, they only sell crude to those buying in US dollars. Enter the brewing perfect storm, and what I meant about this all coming together for me.

As Titus noted, oil sales throughout the world are denominated in US dollars. Since 1973 OPEC exports have been priced in US dollars. This marketplace gave rise to trillions of petrodollars that get cycled into international oil trade via US dollars. Since most countries rely on oil imports, they are forced to maintain large stockpiles of US dollars in order to continue imports. This creates a consistent demand for US dollars and positive pressure on the US dollar’s value, regardless of economic conditions in the US. This in turn allows the US government to issue currency below cost of currency production and bonds at lower interest rates than they otherwise would be able to. As a result the U.S. government can run higher budget deficits at a more sustainable level than can most other countries.

So think about that scenario. Here we come off the Gold Standard in 1971. Then turn right around in 1973 and cut a deal with OPEC to sell their product exclusively in ISD. So in fact we exchanged what backed our currency from one tangible asset to another. We went from a gold standard to an oil standard (ironic given the company name of America's first oil monopoly). The USD is in effect, a "petro-currency."

This is why we have been the world's standard currency, the reserve currency. Oil makes every country's, 1st, 2nd or 3rd world, economy go round. And you can't get oil without US Dollars. And just as an aside, I don't know about you, but do you think swapping gold as the asset which backs our dollar, for oil, was a "good" move? We went from gold to a deal cut with an orginization whose code of moral conduct would raise eyebrows in the Court of Caligula. And I'm supposed to feel secure with that swap?

Enter what happened 12 days ago.

On April 18, 2011, the Chicago Mercantile Exchange launched six Euro-denominated oil contracts. Pricing, margining and treasury for exchange-cleared oil price management can be fully executed in Euros. These contracts should make certain trading functions more streamlined for oil exporters to and from oil consumers in the Euro-zone, with no need to buy US dollars to effect oil trades.

Why? Why would they do this? To be more competitive with OTC markets like ICE? That's part of it, in my opinion. But it doesn't fully explain this move because even those ICE markets, those OTC driven markets, still originate with a crude purchase in USD. You can't get the oil from OPEC without a Ben Franklin, period. There can only be one explanation - they're testing the waters. See, this petro-currency of ours has allowed us to remain the dominant world currency reserve in the post gold standard era. But we have so abused the privilege, by running up deficits unprecedented in human history, that foreign markets are testing whether it's a better deal for them to move to something else. If the denomination of oil sales changes to another currency, such as the Euro or the Yen for example, countries would sell dollars and cause the banks to shift their reserves, because they would no longer need US dollars to buy oil. Forty years of petro-dollars would start to get flushed from central bank reserves. This shift in petro-currency reserve status would lower the US dollar, exponentially, near collapse.

In other words, this oil backed scenario of USD allowed us one hell of a long leash. We could screw up, even screw up bad, and the world would help to maintain the value of the dollar because they needed it to maintain their economy - to buy oil. But we have so depreciated our dollar with wreckless spending, so exacerbated the length of that leash, that we are driving up the cost of oil FOR THEM. As our Fed prints more money, the cost of oil goes up because there are now more petro-dollars get it? We're casuing world-wide energy inflation. The cost of lubricating the economies around the world goes up. And those economies are getting pissed. And think about it from OPEC's perspective. Do they want to continue to be paid exclusively in a currency that is committing suicide via spending and printing? And what are they to do if China and India et al band together and say, "we want to business in Euros"? If you're OPEC what do you do? At current the US is still the largest consumer of energy, but as China rises it is feasible they or India may eclipse us as the world's leading energy eater. Once that happens OPEC may seriously consider any suggestion of their's to alternate out of the USD. How could they not if we are replaced as OPEC's top client?

Forget everything else - if we have $14 trillion out in debt, and are furiously printing money to spend (like the current administration), and amist that OPEC switches to a different petro-dollar, causing this forty year flush from foreign central reserves (causing the market to be flooded with USD in addition to the printed money, and debt owed), brother - that's game over. We are the Wiemar Republic at that point. It's pick up your pay check in a wheel barrel time.

Now, this threat to move from the USD as the reserve petro-currency gets tossed around by people whom want to rattle the US cage, routinely. Russia chatted it up in 03', Iran has, Venezuela has. All of it went nowhere. But when the Chicago Mercantile Exchange talks about it (hell, actually does it on a limited basis) we better sure as hell pay attention, and do something. Especially when every other piece of the perfect storm I just described, is already in place.

But what is that something?

The world's need for oil is not going anywhere. And in lieu of a return to the gold standard, which has almost zero chance of occurring, ever, we must defend our status as the world's petro-currency.

1.) We have to get control of our national debt. Whether it's challenging our dominance as the world's petro-currency, or any other aspect of the US based world economy, China, Russia and India are playing for keeps. And OPEC will side with whomever emerges. We can not emerge with $14 Trillion in debt on our back, period.

2.) The OTC genie is already out of the bottle. It's in everything, in every market, in total it is a $600 Trillion derivatives market - you can't roll back the Clinton Act of 2000 without sending the entire economy of the world into cardiac arrest. What you can do is amend the oil futures commodity exemption. And by amend, I mean limit the position one can have for non delivered OTC contracts. In other words, if you're not buying oil that's going to be delivered (presumabley for use), there would be a limit to how many OTC contracts you can buy sell or trade. You base these on percentages of trade volume so as not to make the number artificial, and almost immediately archaic. Put simply, there will be less activity in OTC oil futures (less participation via the percentage limits or they'll return to the traditional organized exchanges), less flurry, less volatility. I put that chart (at the top) in this post to make this very point. Click on it if you need to, in order to see the spike demarcation line. It's clearly just after the 2000 Clinton Act (and yes, I intend to insert the name "Clinton" each and every damn time I refer to this Act, for the rest of my life - it's his, he owns it. Blaming Bush as an after thought is grasping). Such percentage based limits, as long as the percentage is based on market activity, will help (in my opinion) to smooth out the spikes, or at least those caused by speculators.

3.) It sounds trite and perhaps overly simple after all of this, but a comprehensive domestic energy plan with proven technology like nuclear, coal, and natural gas - and yes, more drilling - will serve to stabilize our position as the petro-currency of choice. Because our title as the reserve petro-currency is partly based on the ever expanding dynamism of our economy. People trust (or did) the worth of the US dollar based on the growth of that economy. In addition, the more available energy is the faster we will grow, the more we will buy from OPEC, keeping ahead of China and other rivals as OPEC's #1 customer. And believe me, as bad as that sounds, China being their #1 customer sounds much, much worse. As we all know, the high roller in the room gets the most attention, and we don't want Beijing being the big hand at the table ... getting all the comps once reserved exclusively for us.

Well... That's my 2 petro-cents.