TPS

The maybe they could have traded up to to get Whitner at #26...hind sight....

And the usual response from those who blindly follow... Do you realize the implications of this? Obviously not. The best you can do is attack the person who posts the article. IT says so much more about you than your weak attempt to attack Chicot...

First, Phillips was from New Zealand and attended the London School of Economics (starting the year Keynes, who was at Cambridge, died). Second, American Keynesian economics is based upon "interpretations" of Keynes by John Hicks and Alfred Hansen. Samuelson followed this line of thought. Actual disciples of Keynes at Cambridge--like Nicholas Kaldor, Joan Robinson (she called American Keynesians "Bastard Keynesians"), and Michel Kalecki--disagreed with those interpretations (one main reason was because those mechanical models ignored his discussion on uncertainty, which was fundamental in explaining why an economy could be stuck with high unemployment for an extended period). These economists represent the core of the post Keynesian school. An interesting side note on Hicks: toward the end of his life, he wrote a paper criticizing his interpretation of Keynes, mainly because of his admitted omition of the role uncertainty plays in a modern monetary economy. I'll try to simplify things for you: Phillips, a disciple of the Hicksian interpretation of Keynes, published an empirical paper on the trade-off between money wages and unemployment. S&S took it a step further, connecting wages to prices, and then estimating the trade off between inflation and unemployment. This simplified Phillips Curve relationship was then incorporated into the "Bastard" Keynesian models. However, without the concept of uncertainty, there's no role for expectations. This left the door open for Phelps and Friedman. So, yes, it was the American Keynesian School that was under attack, not Keynes's actual theory, which incorporates expectations based upon the concept of fundamental uncertainty. I believe you work in the financial industry, yes? You should read chapter 12 of the General Theory, "The State of Long Term Expectations." It's one of the best discussions on the relationship between real investment and financial investment you'll ever read.

I agree with you again; when will the press get back to focussing on ebezzlement and payoffs...? Can you say Mr. Abramoff?

You obviously don't know anything about Keynes' theory of inflation. Phelps (and Friedman) attacked the notion underlying the Phillips' Curve that there's a trade-off between UP and inflation. Phillips looked at historical data for the UK to come to this conclusion. In the US, Paul Samuelson and Robert Solow (so-called American Keynesians) did a similar study, and they came up with the same results. Phelps and Friedman argued that this relationship would not be permanent once you considered expectations. In particular, they held to the view that expectations were formed by the recent past--"adaptive expectations." Keynes' theory of output, employment, and prices also assumes that current expectations are formed by the recent past. His "theory of prices" is based on how prices are determined at the level of the firm--prices are a function of the costs of production (wages, materials, etc.) and a profit margin. The Phillips Curve relationship that Phelps "debunks" was based on an historical relationship and promoted by the American Keynesian school in 1960, not Keynes. For the record, and I stated this years ago here, I am not a proponent of this simplified interpretation of Keynes. I adhere to a group known as post keynesians, and I am probably most influenced by Hyman Minsky.

What a dope. First, you should be referring to me, not BlueFire. Second, I gave a possible scenario for how someone or an organization could have influenced gas prices; or, in fact, as the articles stated, did influence gas prices (not the only influence, but added "fuel" to the downward pressure). I stated it was either serendipity or consipiracy, and that I leaned toward the former (however, I said the latter wouldn't surprise me either). Who said that one was ok and the other wasn't? It is politics as usual. Many corporations make "bets" on which party (person) they believe will win the White House. They give to both sides, but tend to give more to the side they think will win. I don't think they should be giving at all, and I've constantly ranted that "both sides are bought and paid for." I've stated time and again, that I DO NOT VOTE FOR EITHER MAJOR PARTY ANYMORE (10 years now). I have voted for independents, greens, and believe it or not libertarians. The hypocrits around here are people who constantly defend (and believe) one party to no end. And from what I've read, you are one of them.

Would you say the same thing about a 16 year old girl and she was an intern for someone? And then imagine if that girl were your daughter...

Excellent point! That fits right into the Bills' game plan. Keep runnin' willis, don't turn the ball over, and play great defense. The Bears can be had!

I think people sensationalize it because it's not something you can reverse or slow in a short period: something has to be done now before we pass the tipping point. Fortunately, businessmen/investors have to be pragmatic, and they know which side is spinning the issue.

I'm sure it's only liberal groups who believe in this global warming crap... climate change?

Given Da Bears have given up a total of 13 points in 2 games at home, I think the Bills defense will have to score a TD to have a chance.

Thank you for putting words in my mouth. I stated that the previous high was in 2000, and mentioned that Clinton was president then. I did not state the market went up 0% with republicans in charge. I said the market's gained 0% since the previous peak in 2000 (In fact, the market has gone up since Bush took office, because as we all know it started its fall before he took office). Then, panties got twisted, and you guys all inferred I said "Bush bad." Now your telling me I'm saying "democrats good." Yes, there was a long bear market for much of Bush's first term, and many things happened to extend it--not the least of which was the accounting scandals. The bear ended in 2003, and the market's done pretty well since then. As KD said, only if you were foolish enough not to invest while it was down, did you experience the 0%. By the way, how do you know I wasn't complaining when the market began its decline in 2000 (under Clinton)? Oh, and I'm not political either....

And the Dow dropped some 2000 points. Your point?

How are you defining the crash? The bear market that lasted for 2+ years (and, yes it began in Clinton's last year)? Or the initial drop in 2000? In percentage terms, one of the largest "crashes" over the past 40 years was in October 1987. But, hey, what do I know...

Coming from the guy who thinks the administration controls monetary policy. It's quite a stretch to go from my statement that "it took 6 years to break the previous high," to I must believe stock prices should always go up. I'm getting used to people stretching my statements though. The obvious inference from my statement is that the down turn in the Dow must have been pretty severe, and the resultant recovery a long, slow process. But maybe that's too complicated...

Whew! That sure took a long time. I never said the prices were being affected by the index weight change after that. I agree prices will eventually settle to what the fundamentals dictate. Oh, oh! In one paragraph you admit there can be a "pop", and the next there's no effect? Who said they were manipulating it for their own benefit? You asked some flippant question earlier about who the GS traders work for, not about manipulation for their own benefit. Try to stay on topic. The topic: Both articles STATE that the change in the weight had a significant impact on gasoline prices in August. Are both the NYT and FT articles incorrect? Who should we believe? Them, or you and the monkey? Seems to me the only contentious issue is, what was the underlying reason for the change? As i said, I lean toward the serendipity explanation.

By the way, I wouldn't get too cozy with the DOW at the moment; the put-call ratio on the index is about 2-1.

You're celebrating the fact that the DOW's at a new high. I pointed out that it took 6 years to do that. I am happy that it finally did, especially for my pension. I am unhappy though that it took so long to get back to this point. You inferred I blame Bush. However, I've never disagreed with the fact that presidents have very little control over the economy. Sorry I pushed the Clinton button...

I guess the other quotes are irrelevant? That article states how influential the index can be and was on unleaded prices. I quoted Vergler on the explanation. For one, he's not with GS. Yes, they don't want to be a leader in the new product--they don't want to influence its price. However, their action on "not wanting to influence the price" for the new product, caused price changes in the old unleaded product--and the FT article said it was a significant influence. The gist of the article you link to (and the NYT article) supports the idea that GS's move DID influence the price of unleaded, and it was significant. Are you now disputing the gist of that article? Or since it's the position I've taken all along, is it that you have no choice but to continue to dance around and try to dispute that fact? Conspiracy or serendipity for Bush? More likely serendipity, but the connection with his new T-sec allows for the possibility of the first. The link I initially found makes that contention. While I lean toward serendipity, the former wouldn't surprise me either. Because after all, no one has ever tried in the past to influence prices....

This is fantastic news! The Dow has grown 0% since the previous high in 2000--under Clinton!!!!

Thanks for finding that. It supports my point entirely. From the article: The article quotes an independent energy economist to explain the move: That has nothing to do with "market conditions," rather how influential the index can be on the futures price--which is the point I've made all along. So the decision by GS, according to this economist, was made to reduce their influence on the new RBOB futures contract, but it actually lead to influencing the old unleaded contract. Serendipity or conspiracy, who knows?

That's what I've been saying. The decision by GS added another kick to the factors putting downward pressure on gas prices. That would help explain the initial "unprecedented" drop. Prices are staying down because of the demand-supply conditions. My argument is not inconsistent with that. Not according to GS's August press release. It looks pretty well distributed between the remaining energy-related products--crude wti, brent crude, heating oil (the largest shift), and gasoil. Now that your jumping on monkey's bandwagon, my response to both of you is that, as I've said all along, there were multiple factors causing the drop in prices; supply and demand conditions were going to lead to a drop. Under most conditions, the drop would've been more gradual, not "unprecendented," yes? With most factors indicating a drop in energy prices, the reallocation by GS to the other energy future's contracts would certainly not be followed by market speculators. When multiple factors are causing prices to fall, and you add another, that helps the momentum; when multiple factors are causing prices to fall, and only one factor adds upward pressure, certainly one would not expect prices to reverse. AS for your last question, I trust you know that most participants in the futures markets are speculators--taking long positions when they believe prices will head higher, shorting when they believe prices will fall. They are not holding oil in their portfolios, they are speculating in a derivative security. When the market turns against their bet, they get out--as you mentioned before--by offsetting longs with shorts. I'm surprised (maybe I shouldn't be) that you can't see this possibility adding "fuel" to the drop in gas prices: Market conditions were leading to a drop in gas prices--we all agree there. Under most circumstancess prices would fall at a steady or moderate clip. The argument being made is that Gold-Sachs' decision to re-weight the amount of unleaded gas in the GSCI meant downward pressure on future's contracts. when they addounced this move, that caused speculators in the futures market for unleaded to reverse their long positions--closing them out and then moving to short positions. The drop in unleaded futures prices helped create the "unprecendented" drop in spot gasoline prices in August. A quote in the article, "at the start of the week (Aug. 9) everyone was talking about $4/gal gas." That means most speculators were still in long positions that week. When the market turned, for all reasons cited, including GS's announcment, that created "unprecedented" momentum for prices to fall. Again, I don't know if it was a "conspiracy" or serendipity. The focus of this topic was on whether the Admin "manipulated" prices. I think I posted something early on that it was market conditions. I recently came across this interesting possibility. People can draw their own conclusions.

It would be helpful if you provided the source for your statement of a "50% increase in the oil weight." While they announced a transition to the reformulated gas in June, initially they were supposed to "roll" 1/3 of the unleaded into the reformulated over a 3 month period. Instead, they rolled 1/3 in August, then phased out the unleaded contracts over sept and oct. So the end result was that the weight (formerly for unleaded, now reformulated) was reduced over a 3 month period. Again, I'm not saying the move by GS was the only factor. I'm saying it helped push the prices even lower. Couple of quotes from the NYT article: “They (GS) started unwinding their positions, and those other longs also rushed to the door at the same time,” said Lawrence J. Goldstein, president of the Petroleum Industry Research Foundation. “We saw gasoline fall 82 cents in the wholesale market over a four-week period, which is unprecedented,” he said. Mr. Goldstein said that the decline in gasoline prices helped send prices of the whole group of energy-related products down.

I never said market forces caused a change in the weights. See the explanation on how the weights are determined. I did agree that market forces were putting downward pressure on gasoline prices. The point I have made is that the decision to change the weight in the index helped create even greater downward pressure on gasoline prices (and not just by the influence of the reduced demand from GS's index, but also the announcement by GS of its decision to reduce the weight, which caused other traders to change their positions in the unleaded futures). Was it a conspiracy to help the Bush admin? I certainly don't know. However the change in the weight seems inconsistent with what's stated on their web site. Here's their quote: "The GSCI is world-production weighted; the quantity of each commodity in the index is determined by the average quantity of production in the last five years of available data. Such weighting provides the GSCI with significant advantages, both as an economic indicator and as a measure of investment performance. For use as an economic indicator, the appropriate weight to assign each commodity is in proportion to the amount of that commodity flowing through the economy (i.e., the actual production or consumption of that commodity). For instance, the impact that doubling the price of corn has on inflation and on economic growth depends directly on how much corn is used (or produced) in the economy."

Did you read the quote I posted from the GS site on the GSCI index and how the weights are determined? Your explanation makes no sense based on the gold sach explanation. Your question on GS traders is irrelevant to the issue unerlying the change in the weight for unleaded gas in the GSCI index. This change is analogous to the DJIA making a change in the composition of the stocks contained in their index. They only do so when the structure of the economy has changed. so they need to add companies to the index that reflect the changed structure of the economy. Traders don't change the index, but you already knew that...