Executive Summary

Food grains and oil are the two most influential commodity groups in the world. Oil prices are causing a worldwide harvest of disposable income that is reaching into the breadbasket of the world.

Because oil prices are skyrocketing, the use of food grains has become a common way to offset oil dependency. Yet people around the world are going hungry because of the shortage caused by alternative energy demands and skyrocketing food prices.

Meanwhile, Islamic nations harvesting a windfall from oil prices are trying to put away their inter-religious differences and unite against common enemies.

Inside the White House

by Bill Koenig

Toward the middle of Israeli Prime Minister Ehud Olmert's 75-minute meeting with President Bush, a violent storm with wind gusts of 55 to 70 mph hit the Washington, D.C., area.

As the very moment Olmert was leaving the West Wing of the White House, the White House press and photographers were forced to run quickly to the pressroom for cover because of high winds, lightning and pouring rain.

Olmert was under the covering of the porte-cochere at the West Wing entrance and got into his limousine quickly due to the horizontal rains and very strong winds.

Olmert's staff members ran for their vehicles as the downpour began — which completely drenched them. (It rained one to three inches in just an hour at the White House and throughout parts of the Washington region.)

Up to 500,000 residences and businesses were without power. Power was off at our home for nine and a half hours and came back on at 12:38 a.m. It was projected that some areas of Washington could remain without power for 24 to 48 hours.

A friend who has covered the White House for years said he had never seen a storm hit so quickly with such force, at the exact time a head of state and his staff were leaving.

Mofaz parlays with Shas to avoid early elections (The Jerusalem Post)

Transportation Minister Shaul Mofaz has been forging closer links with Shas to head off early elections and lay the groundwork for an alternative government headed by him in the current Knesset.

Mofaz has held several discussions with the Shas chairman — Industry Trade and Labor Minister Eli Yishai — and Communications Minister Ariel Atias. The two reportedly told him that they would support him if he promised to increase child allowances. Shas sources said party leaders have already reached agreements with Mofaz on this issue.

Mofaz believes he can prevent early elections and is acting to secure Shas' support before the Kadima leadership primary. This would give him a huge advantage over his main rival, Foreign Minister Tzipi Livni, who is leading in the public opinion polls.

Mofaz believes that Kadima's Knesset faction and the party's central activists and mayors, who fear falling from power if new elections are held, would support him.

Koenig's perspective: As stated, Kadima's faction and others in the coalition believe they will fall from power in the event the current government collapses and there are new elections. The Shas Party (the Orthodox Jews) may have once again found a way to legally extort money from the ruling coalition.

Netanyahu had hoped Shas would leave the current government, which would collapse the Israeli government and force new elections.

Candidly speaking: end of the Olmert regime

(Isi Leibler, The Jerusalem Post)

Candidly Speaking: End of the Olmert regime

It could be weeks, or even months. But Ehud Olmert's political fate is sealed. Even if the nauseating revelations in Morris Talansky's testimony fail to result in a formal indictment, Olmert has passed the point of no return in the court of public opinion, which has determined that he must go.

The displays of excessive venality and abuse of power were the final straw. Furious Israelis will not forgive the prime minister for accepting "gifts" of cash in envelopes, without receipts, in an obvious attempt to conceal how the money was spent. There is also an enormous upsurge of rage concerning his use of funds for personal gratification.

Massive wealth controlled by a few companies and individuals who have political influence

Note: The following is an excerpt from David Rothkopf's excellent article in The Washington Post entitled "They're Global Citizens. They're Hugely Rich. And They Pull the Strings." This gives us a good idea of the challenges facing the world today due to the enormous influence of a few people and companies.

Massive wealth controlled by a few companies

• Today the top 50 financial institutions control almost $50 trillion in assets, by one measure nearly a third of all assets worldwide.

• The world's biggest corporations, such as Exxon or Wal-Mart, have annual sales (and thus financial resources) that rival the gross domestic product of all but the 20 or so wealthiest nations.

• The top 250 companies in the world have sales equal to about a third of global GDP (these are very different measures, but they give a rough sense of relative size).

• The people who run these big international organizations can have much more power over key aspects of your daily life and over global trends than most officials in Washington are likely to have, except in the most extreme circumstances. They can affect investments and job creation, shape culture and influence lawmakers.

• Once again, the meltdown in global financial markets brings this aspect of the story into focus.

  For years, financial elites have argued that markets should self-regulate even as instruments grew more complex and risks more opaque. Then when a crisis came, they used their influence to get top government officials to come in and help cauterize their self-inflicted wounds, warning of a "systemic failure."

  But critics are already correctly charging that new regulations to rein in global markets are largely protecting the interests of the richest.

Superclass wealth

• One distinguishing characteristic of the superclass is the concentration of extreme wealth in the hands of so few.

• Today, the world's more than 1,100 billionaires have a net worth that's roughly double that of the bottom 2.5 billion people on the planet.

• The richest 10 percent of adults worldwide own 85 percent of global wealth, while the poorest half barely only 1 percent.

• The world's almost 10 million millionaires have seen their wealth double to nearly $37 trillion over the past 10 years.

• 100 Chinese billionaires are estimated to have emerged in the last couple of years.

• Growth is taking place, but it is disproportionately benefiting the few.

Koenig's perspective: U.S. Treasury Secretary Hank Paulson, the former chairman of Goldman Sachs, the most profitable company on Wall Street, has stated that the Bush Administration wants the Federal Reserve (a non-federal government entity) to be in charge of overseeing tighter regulation of the financial sector.

Paulson said recently, "In recent years, credit default swaps and over-the-counter (OTC) derivatives have become integral for hedging credit and default risk. Due to innovation and demand, we have seen tremendous expansion in the scale, diversity and impact of these instruments and markets. As trading volumes have surged, so has price volatility, but market infrastructure has not sufficiently evolved to support this expansion."

Mr. Paulson, innovative financial tools haven't worked in hedging risk and default risk because there are still big losers in these instruments. Moreover, the Wall Street gamblers, commercial banks and hedge funds have turned the financial markets into sophisticated financial casinos, with the American taxpayers being looked to for the bailout if all goes wrong. The subprime bailout alone will cost between $500 billion and $1 trillion.

Financial innovation has also led to higher costs of goods, commodities and products for Americans through commodity price manipulation via futures trading (more details below).

In reality, Mr. Paulson, innovation has proven to be a very sophisticated tool at transferring massive amounts of money from a majority of the American people to the pockets of your former company, Goldman Sachs, other very large Wall Street firms, banks, corporations and wealthy investors.

In the past seven years, Americans have personally experienced the largest transfer of their wealth in history to 37 of the 50 most profitable companies in America in the fields of banking, insurance, health care, pharmaceuticals, energy, hedge funds and other smaller companies in these businesses.

The wealth transfers have been in the $3.5 trillion to $4 trillion range, while Americans are running up record levels of personal debt and struggling to make ends meet.

Innovation put many people in homes they couldn't afford — with 2 million American households now at risk of foreclosure. This is further causing a massive family disruption and subsequent ripple effects across America.

Additionally, the loose lending and funding for real estate speculators forced up the cost of home ownership for many Americans, who are now seeing their home equity diminish with an estimated loss at the moment of $3 trillion — which is expected to rise to $6 trillion.

Nearly 8.5 million homeowners had negative or no equity in their homes at the end of March, representing more than 16 percent of all homeowners with mortgages, according to Mark Zandi, chief economist at Moody's Economy.com. He estimates that will increase to 12.2 million, or almost one out of every four homeowners, by the end of June.

On another note, the savings and loan crisis forced a massive consolidation of savings and loans companies and U.S. banks. This is expected to happen once again due to the subprime disaster that will force many small- and medium-sized banks out of business while leaving fewer yet bigger banks — another victory for Wall Street investment and commercial banks.

Wall Street commodity manipulation costing Americans billions

ICE, ICE, Baby, Conclusion(Ed Wallace)

Note: The following is an excerpt from an excellent article by Ed Wallace, who is a recipient of the Gerald R. Loeb Award for business journalism, given by the Anderson School of Business at UCLA, and a member of the American Historical Society. He addresses commodity price manipulation, which is affecting every American to one degree or another.

ICE, ICE, Baby, Conclusion

Here are the key points from the article:

• Record high prices without record low oil inventories; analysts saying that so much money flows into oil commodities that it gives the impression of shortages, when in fact no shortages exist.

• We started as a society that worshiped hard labor and the basic business ethic of building value into the goods you create. How did we get from there to worshiping Wall Street's billion-dollar boys — who create nothing, build nothing, own nothing and deliver no goods, and yet can throw so much money into products made by others that they determine what we consumers will pay for those goods?

• We are rewarding people for sitting at their computers and punching in bets. That's not the way our economy is going to be built; and India and China, with their focus on science and industry and building real businesses, are going to eat our lunch unless the American public wakes up and puts an end to an economy that praises and makes heroes out of speculators."

• "Commodity investors control more U.S. crops than ever before, competing with governments and consumers for dwindling food supplies." That’s right: Food, oil and gasoline have become an "asset class." No longer are you fighting a neighbor at the supermarket over the last box of Cheerios^®; now you're fighting the futures traders, who are actually determining what you will pay for that cereal.

• In the past, the Commodities Futures Trading Commission acted as the cop on the beat, ensuring that buyers in the market were not distorting or manipulating prices beyond what supply and demand normally dictate.

  Certainly, if a hard frost hit Florida and cost growers an orange crop, then bidding up the price of the remaining oranges was both a wise investment and allowed under the trading rules.

  Right now, investors know that if they borrow and invest huge amounts in commodities futures, they can create a shortage on paper — which drives prices up just like an actual shortage of any given product would. What kept traders from cornering the market that way in the past were the government's anti-manipulation rules.

• Professor Michael Greenberger, former director of Commodities Futures Trading Commission, warned about our "New American Economy":

"Should we have an economy that's based on whether people make good or bad bets? Or should we have an economy where people build companies, create manufacturing, do inventions, advance the American society and make it more productive?

Ed Wallace wrote, "Greenberger's statement explains why Detroit and other American manufacturers suffer while Wall Street speculators make a fortune — and your rapidly shrinking checkbook pays for it, every time you buy food, fuel or feed. All because there is no shortage of these goods, you're just being told there is because it's more profitable — for a few — that way."

How did this happen, and who is responsible? Lay, DeLay, Gramm, Gramm & Clinton

The late, infamous Enron head, Ken Lay, realized in the '80s that he could make more money bidding up energy in the futures market than by actually creating and selling energy. But under then-current rules, how much you could make swapping paper was limited.

Fortuitously, Lay had excellent Texas political connections; and in November of 1992, the head of the Commodities Futures Trading Commission moved to exempt energy-derivative contracts and related swaps from any government oversight.

A vote was hurriedly put together, before the Clinton White House would take over, so Lay could finally start "dark" — unregulated — futures trading. The head of the CFTC was Wendy Gramm, wife of Texas Sen. Phil Gramm; five weeks after she left, she became a board member of Enron in Houston.

Fast-forward to late 2000 and H.R. 5660, the Commodity Futures Modernization Act of 2000, sponsored by Republican Congressman Thomas Ewing of Illinois. That bill went nowhere, even though Tom DeLay's wife Christine was then working for a Washington lobbying firm, Alexander Strategies — to which Enron had paid $200,000 to push through legislation for permanent energy deregulation in the "dark" markets.

Six months later came Senate Bill 3283, also named the Commodity Futures Modernization Act of 2000. This time around, the sponsor was Republican Sen. Richard Lugar of Indiana, and now Phil Gramm was listed as one of the bill’s co-sponsors.

Like it had in the House, this bill was destined to go nowhere until, late one night, it was attached as a rider to an 11,000-page appropriations bill — which was signed into law by President Clinton.

Now traders had an officially deregulated market for energy futures. Worse, that bill also deregulated many financial instruments — including the collateralized debt obligations that are at the center of today's mortgage crisis, which may well cost us more than $1 trillion before it's over.

Koenig's perspective:

The financial markets aren't regulated, and the financial institutions' high-priced Washington lobbyists have kept them from being regulated. In other words, the greed of those in major positions within the financial service sector is responsible for financially gutting America.

Professor Greenberger testified Tuesday before the Senate Commerce Committee on the topic of energy market manipulation. He stated that the investment banks, namely Goldman Sachs (GS) and Morgan Stanley (MS), control the price of oil and natural gas through the ICE futures market. He said that Morgan Stanley currently owns 27 percent of the natural gas futures.

Wall Street grain hoarding brings farmers, consumers near ruin(Bloomberg)

Wall Street grain hoarding brings farmers, consumers near ruin

Commodity index funds control a record 4.51 billion bushels of corn, wheat and soybeans through Chicago Board of Trade futures, equal to half the amount held in U.S. silos on March 1. The holdings jumped 29 percent in the past year as investors bought grain contracts seeking better returns than stocks or bonds. The buying sent crop prices and volatility to record levels and boosted the cost for growers and processors to manage risk.

The buying of crop futures alone is about half the combined value of the corn, soybeans and wheat grown in the U.S., the world's largest exporter of all three commodities. The U.S. Department of Agriculture valued the 2007 harvest at a record $92.5 billion.

Fed auctions $75 billion to banks to ease credit stresses (The Associated Press)

Battling to relieve stressed credit markets, the Federal Reserve said Tuesday it has provided a total of $435 billion in short-term loans to squeezed banks since December to help them overcome credit problems.

The central bank announced the results of its most recent auction — $75 billion in short-term loans — the 11th such auction since the program started in December.

It's part of an ongoing effort by the Fed to help ease the credit crunch — which erupted last August, intensified in December and January, and took another turn for the worse in March.

The housing, credit and financial crises have weakened the economy and threaten to push it into recession.

Koenig's perspective: In the latest auction, commercial banks paid an interest rate of 2.22 percent for the loans. The banks then offer the loans at higher (sometimes much higher) rates. Or, they use that money for their investments, which have made major banks enormous in size and influence.

News Briefs

World food prices

Cash prices are below futures prices for food grains, putting a squeeze on the agriculture industry and consumers, and commodity traders are to blame … Bloomberg reports that farmers are confronting mounting costs; and food riots are erupting from Haiti to Egypt, much of it caused because corn, wheat and soybean futures prices on the Chicago Board of Trade are being run up by investors who are seeking better returns than they'd get from stocks or bonds.

Investments in grain and livestock futures have more than doubled to about $65 billion from $25 billion in November, according to consultant AgResource Co. in Chicago.

World oil prices

The Commodity Futures Trading Commission disclosed a broad probe into potential oil market manipulation after crude-oil prices topped $130 a barrel last week and tested all-time highs … Energy consumer groups and some financial insiders have contended that large investments in commodity futures by hedge funds and pension funds are distorting prices.

One suspicion is that energy companies and traders have at times issued a flood of orders during a time window used by the price reporting system run by Platts to determine its reported prices for physical oil transactions. Then traders may have used the potentially distorted prices to make profits in other markets.

Platts has said its system has safeguards to protect against manipulation. Subpoenas on the matter have gone out in several stages, people familiar with the cases say. (Dow Jones)

Russia

BP PLC's partners in a Russian oil venture sought the ouster of the unit's chief executive, escalating a dispute that could shape the future of the British energy giant and the role of foreign companies in Russia under the country's new president … The feud threatens to undermine TNK-BP, a pioneering 50-50 venture in Russia which accounts for nearly a quarter of BP's oil production and close to a fifth of its reserves.

Some observers believe that after several years of pressuring foreign investors such as Royal Dutch Shell PLC to give up control over major energy projects, the Kremlin now is looking for a way to signal a less-confrontational approach. Foreign expertise and technology could help the Kremlin reverse a slide in crude-oil production this year that has contributed to record high prices. (The Wall Street Journal)

Freedom of the press in Russia is disappearing as some media critics of Vladimir Putin are vanishing from the public eye … Although denied by the Kremlin, there is a so-called "stop list" that blacklists certain opponents of Putin from television news and political talk shows.

The stop list is, as blackballed political analyst Mikhail Delyagin put it, "an excellent way to stifle dissent." It is also a striking indication of how Putin has relied on the Kremlin-controlled television networks to consolidate power, especially in recent elections. (The Wall Street Journal)

Saudi Arabia

As a way to deepen the Shiite-Sunni split and create allies against an aggressive and power-grabbing Shiite Iran, the Saudis are hosting an interfaith conference of over 400 Islamic scholars from around the world … The Saudis are trying to inoculate against prospects that internal Iranian tensions and ambitions will cause Tehran to increase its subversive activities among Shia in the Arabian Peninsula and in Lebanon.

At current oil prices, the Saudis are absolutely loaded with cash. In the Arabian Peninsula as elsewhere, money buys friends. In Arabia, the rulers have traditionally bound tribes and sects to them through money.

At present, the Saudis can overwhelm theological doubts with very large grants and gifts. The Saudi government is carefully strengthening its ties inside Saudi Arabia and throughout the Sunni world using money as a bonding agent. That means that conservative Sunnis who normally would oppose this kind of a conference are less apt to openly criticize it. (stratfor.com)

Connecting the Dots —

by Bill Wilson, KIN Senior Analyst

Iranian President Mahmoud Ahmadinejad has delivered yet another fiery speech — this time announcing that Israel will soon disappear and all "satanic powers," such as the United States, will fall.

Ahmadinejad said, "Today, the time for the fall of the satanic power of the United States has come and the countdown to the annihilation of the emperor of power and wealth has started ... I tell you that with the unity and awareness of all the Islamic countries, all the satanic powers will soon be destroyed."

White House spokesperson Dana Perino responded, saying, "It's that kind of rhetoric that just serves to further isolate the Iranian people. We'll let him go on and be bombastic if he wants, and ignore him."

It appears that neither the White House nor the Congress understand the implications of Ahmadinejad's remarks. But the American people understand them full well every time they fill up their vehicles at the gas pumps. Americans are paying 30 percent more for gasoline than we did about a year ago.

Every time Americans go to the grocery store, they understand Ahmadinejad's remarks, as food prices have soared about 30 percent more than a year ago.

Every time Americans pay their utility bills, they understand Ahmadinejad's remarks because the cost of utilities has risen, in many cases, over 100 percent.

Congress and the White House must wake up and realize that when Ahmadinejad says "all the Islamic countries" are in unity against the United States, his remarks should not be ignored. Yes, Ahmadinejad is a madman, just as Hitler was before him.

And the sooner America's leaders figure out that our nation is at war with Islam, the faster they will understand that the OPEC grip on high oil prices is just one strategic linchpin in Islam's war plan against the West. Another is using the windfall money to buy America's debt, companies and financial base.

American leaders need to wake up and realize these are war plans, not economic happenstance caused by the weak dollar.

It is Islam, not "terror," that is at war with the United States and Israel. Terror is Islam's military strategy. Oil and financial prowess are even more effective strategies being employed by Islam, because it believes that if it attacks the disposable income of every American citizen, the entire nation will be brought to its knees and its will to resist will be destroyed.

Meanwhile, America's leaders have accepted the deluded ideas that poverty causes terrorism, that the weak dollar causes high oil prices, and that Arab investment in American companies is a sign of a strong economy.

Proverbs 16:18 (NKJV) says, "Pride goes before destruction, and a haughty spirit before a fall."

Wake up, America before it's too late!

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