Yellow Science

By JAMES KERIAN

from The Wall Street Journal
June 25, 2008

In the late 19th century, William Randolph Hearst and Joseph Pulitzer developed what would come to be known as yellow journalism. By disregarding what had been standard journalistic methods, particularly in regards to the verifying of sources, these two publishers were able both to push their country toward war with Spain and dramatically increase the circulation of their respective newspapers.

Man has always had a healthy desire for knowledge, and it is the feeding of this hunger that ennobles journalism. Hearst and Pulitzer were acutely aware that man has a less healthy but no less voracious desire to believe that he has knowledge, particularly knowledge of something sensational. It is the feeding of this hunger that irreparably disgraced journalism, and a century later now threatens to do the same to science.

* * *

Scientists, like journalists, are called upon to plumb the depths of the unknown and to fairly and objectively report their findings to their own professional community as well as the general public. Scientists, like the journalists of yesteryear, have specific methods for ensuring that the public trust placed in them is not abused. The most fundamental of these methods is the well-known, if not so creatively named, scientific method. The essence of the scientific method is the formulation of hypotheses (ideas) and the using of these hypotheses to make predictions that can be experimentally tested. In the words of Sir Thomas Eddington in "The Philosophy of Physical Science," "Every item of physical knowledge must therefore be an assertion of what has been or would be the result of carrying out a specified observational procedure."

Nevertheless, over the past several decades an increasing number of scientists have shed the restraints imposed by the scientific method and begun to proclaim the truth of man-made global warming. This is a hypothesis that remains untested, makes no predictions that can be tested in the near future, and cannot offer a numerical explanation for the limited evidence to which it clings. No equations have been shown to explain the relationship between fossil-fuel emission and global temperature. The only predictions that have been made are apocalyptic, so the hypothesis has to be accepted before it can be tested.

The only evidence that can be said to support this so-called scientific consensus is the supposed correlation of historical global temperatures with historical carbon-dioxide content in the atmosphere. Even if we do not question the accuracy of our estimates of global temperatures into previous centuries, and even if we ignore the falling global temperatures over the past decade as fossil-fuel emissions have continued to increase, an honest scientist would still have to admit that the hypothesis of man-made global warming hardly rises to the level of "an assertion of what has been or would be the result of carrying out a specified observational procedure." Global warming may or may not be "the greatest scam in history," as it was recently called by John Coleman, a prominent meteorologist and the founder of the Weather Channel. Certainly, however, under the scientific method it does not rise to the level of an "item of physical knowledge."

Nevertheless, the acceptance of man-made global warming as scientific fact has become so prevalent that the secretary-general of the United Nations, Ban Ki-Moon, recently declared: "The debate is over. It's time to discuss solutions." Leaving aside the question of the secretary-general's qualifications, that is certainly one of the most antiscientific statements ever made. The first question that this raises is why have so many scientists chosen to ignore this glaring failure of the global warming hypothesis to meet the standards of their own profession? The second question is what, if anything, can be done about it?

The first, and most obvious, temptation for this sort of willful blindness is financial. Hearst made only a fraction of his estimated $140 million in net worth from yellow journalism. Global warming, on the other hand, has provided an estimated $50 billion in research grants to those willing to practice yellow science. Influence in the public sphere is another strong temptation. It might not be as impressive as starting the Spanish-American War, but global-warming alarmists have amassed a large group of journalists and politicians ready to silence any critics and endorse whatever boondoggle scheme is prescribed as the cure to our impending climate catastrophe.

Finally, one should not underestimate the temptation of convenience. Just as it is far easier to publish stories without verifying the sources; so is it much more convenient to practice yellow science than the real thing. It takes far more courage, perseverance, and perspiration to develop formulas, make predictions, and risk being proved wrong than to look at historical data and muse about observed similarities. Yellow scientists have fled the risks of science that Albert Einstein described when he said, "No amount of experimentation can ever prove me right, a single experiment can prove me wrong."

* * *

The layman might object that this is not his problem. Surely Joe Six-Pack should not be expected to monitor the findings of research physicists; if anything is to be done about this collapse of scientific standards, it must be done by the scientific community itself. Unfortunately, history has shown the inability of professional communities to police their own ranks. When it first reared its head, yellow journalism was roundly condemned by the journalistic community. In fact, it was these critics who coined the term yellow journalism. The condemnation of their peers was an insufficient deterrent for Pulitzer and Hearst, because it was the approval of the public that drove their circulation. Eventually the entire journalistic community acceded to the sensationalism that the public seemed to insist on.

In recent decades, the scorn of prominent scientists such as John Coleman has been similarly unable to stop the ascendancy of the global-warming hypothesis as the public has been increasingly drawn by its sensationalism. The scientific community as a whole is on the brink of acceding to Ban Ki-Moon's insistence that "the debate is over" and turning now to their grant applications.

Ultimately, it is only the public that holds the power to enforce professional standards, and therefore each of us must accept this responsibility. Most of us will not be able to comprehend the latest climatologic studies from the Massachusetts Institute of Technology, but fortunately that is not necessary. However complex the information may be, the standards are quite clear. One need not be a Beltway newshound to know that whatever follows the phrase "unnamed sources in the capital" or "rumors in Hollywood are" is not real journalism. Similarly, one does not need an advanced degree in natural science to understand that whatever follows the phrase "most experts agree" or "no one can measure the exact effect but" is not real science. In fact, if there is no possible way that a statement can realistically be tested, it probably fails to meet the standards for any professional community and is of no real use to the public.

The long-term results of yellow journalism have probably been more devastating than the war it started. Journalists have lost the respectability of their profession, and the public has lost real journalism. We are in very real danger, as scientists and as a nation, of losing the respectability of a professional community that has done so much to make this country great in the past hundred years. If yellow science overcomes real science it will not only be on account of the greed, ambition, and cowardice of our scientists but also the sloth and cowardice of a public that is unwilling to stand up and demand professionalism. This is why, as the editors of the New York Press said in 1897, I "called them yellow because they are yellow."

Mr. Kerian is a mechanical engineer and small business owner in Grafton, N.D.

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Google is making us stupid

(selected paragraphs from http://www.theatlantic.com/doc/200807/google)

Thanks to the ubiquity of text on the Internet, not to mention the popularity of text-messaging on cell phones, we may well be reading more today than we did in the 1970s or 1980s, when television was our medium of choice. But it’s a different kind of reading, and behind it lies a different kind of thinking—perhaps even a new sense of the self. “We are not only what we read,” says Maryanne Wolf, a developmental psychologist at Tufts University and the author of Proust and the Squid: The Story and Science of the Reading Brain. “We are how we read.” Wolf worries that the style of reading promoted by the Net, a style that puts “efficiency” and “immediacy” above all else, may be weakening our capacity for the kind of deep reading that emerged when an earlier technology, the printing press, made long and complex works of prose commonplace. When we read online, she says, we tend to become “mere decoders of information.” Our ability to interpret text, to make the rich mental connections that form when we read deeply and without distraction, remains largely disengaged.
....
The Net’s influence doesn’t end at the edges of a computer screen, either. As people’s minds become attuned to the crazy quilt of Internet media, traditional media have to adapt to the audience’s new expectations. Television programs add text crawls and pop-up ads, and magazines and newspapers shorten their articles, introduce capsule summaries, and crowd their pages with easy-to-browse info-snippets. When, in March of this year, TheNew York Times decided to devote the second and third pages of every edition to article abstracts, its design director, Tom Bodkin, explained that the “shortcuts” would give harried readers a quick “taste” of the day’s news, sparing them the “less efficient” method of actually turning the pages and reading the articles. Old media have little choice but to play by the new-media rules.
...
“The ultimate search engine is something as smart as people—or smarter,” Page said in a speech a few years back. “For us, working on search is a way to work on artificial intelligence.” In a 2004 interview with Newsweek, Brin said, “Certainly if you had all the world’s information directly attached to your brain, or an artificial brain that was smarter than your brain, you’d be better off.” Last year, Page told a convention of scientists that Google is “really trying to build artificial intelligence and to do it on a large scale.”

Such an ambition is a natural one, even an admirable one, for a pair of math whizzes with vast quantities of cash at their disposal and a small army of computer scientists in their employ. A fundamentally scientific enterprise, Google is motivated by a desire to use technology, in Eric Schmidt’s words, “to solve problems that have never been solved before,” and artificial intelligence is the hardest problem out there. Why wouldn’t Brin and Page want to be the ones to crack it?

Still, their easy assumption that we’d all “be better off” if our brains were supplemented, or even replaced, by an artificial intelligence is unsettling. It suggests a belief that intelligence is the output of a mechanical process, a series of discrete steps that can be isolated, measured, and optimized. In Google’s world, the world we enter when we go online, there’s little place for the fuzziness of contemplation. Ambiguity is not an opening for insight but a bug to be fixed. The human brain is just an outdated computer that needs a faster processor and a bigger hard drive.

‘Perhaps 60% of today’s oil price is pure speculation’

by F. William Engdahl


Global Research, May 2, 2008



The price of crude oil today is not made according to any traditional relation of supply to demand. It’s controlled by an elaborate financial market system as well as by the four major Anglo-American oil companies. As much as 60% of today’s crude oil price is pure speculation driven by large trader banks and hedge funds. It has nothing to do with the convenient myths of Peak Oil. It has to do with control of oil and its price. How?

First, the crucial role of the international oil exchanges in London and New York is crucial to the game. Nymex in New York and the ICE Futures in London today control global benchmark oil prices which in turn set most of the freely traded oil cargo. They do so via oil futures contracts on two grades of crude oil—West Texas Intermediate and North Sea Brent.

A third rather new oil exchange, the Dubai Mercantile Exchange (DME), trading Dubai crude, is more or less a daughter of Nymex, with Nymex President, James Newsome, sitting on the board of DME and most key personnel British or American citizens.

Brent is used in spot and long-term contracts to value as much of crude oil produced in global oil markets each day. The Brent price is published by a private oil industry publication, Platt’s. Major oil producers including Russia and Nigeria use Brent as a benchmark for pricing the crude they produce. Brent is a key crude blend for the European market and, to some extent, for Asia.

WTI has historically been more of a US crude oil basket. Not only is it used as the basis for US-traded oil futures, but it's also a key benchmark for US production.




‘The tail that wags the dog’


All this is well and official. But how today’s oil prices are really determined is done by a process so opaque only a handful of major oil trading banks such as Goldman Sachs or Morgan Stanley have any idea who is buying and who selling oil futures or derivative contracts that set physical oil prices in this strange new world of “paper oil.”

With the development of unregulated international derivatives trading in oil futures over the past decade or more, the way has opened for the present speculative bubble in oil prices.

Since the advent of oil futures trading and the two major London and New York oil futures contracts, control of oil prices has left OPEC and gone to Wall Street. It is a classic case of the “tail that wags the dog.”

A June 2006 US Senate Permanent Subcommittee on Investigations report on “The Role of Market Speculation in rising oil and gas prices,” noted, “…there is substantial evidence supporting the conclusion that the large amount of speculation in the current market has significantly increased prices.”


What the Senate committee staff documented in the report was a gaping loophole in US Government regulation of oil derivatives trading so huge a herd of elephants could walk through it. That seems precisely what they have been doing in ramping oil prices through the roof in recent months.

The Senate report was ignored in the media and in the Congress.

The report pointed out that the Commodity Futures Trading Trading Commission, a financial futures regulator, had been mandated by Congress to ensure that prices on the futures market reflect the laws of supply and demand rather than manipulative practices or excessive speculation. The US Commodity Exchange Act (CEA) states, “Excessive speculation in any commodity under contracts of sale of such commodity for future delivery . . . causing sudden or unreasonable fluctuations or unwarranted changes in the price of such commodity, is an undue and unnecessary burden on interstate commerce in such commodity.”

Further, the CEA directs the CFTC to establish such trading limits “as the Commission finds are necessary to diminish, eliminate, or prevent such burden.” Where is the CFTC now that we need such limits?

They seem to have deliberately walked away from their mandated oversight responsibilities in the world’s most important traded commodity, oil.

Enron has the last laugh…

As that US Senate report noted:

“Until recently, US energy futures were traded exclusively on regulated exchanges within the United States, like the NYMEX, which are subject to extensive oversight by the CFTC, including ongoing monitoring to detect and prevent price manipulation or fraud. In recent years, however, there has been a tremendous growth in the trading of contracts that look and are structured just like futures contracts, but which are traded on unregulated OTC electronic markets. Because of their similarity to futures contracts they are often called “futures look-alikes.”

The only practical difference between futures look-alike contracts and futures contracts is that the look-alikes are traded in unregulated markets whereas futures are traded on regulated exchanges. The trading of energy commodities by large firms on OTC electronic exchanges was exempted from CFTC oversight by a provision inserted at the behest of Enron and other large energy traders into the Commodity Futures Modernization Act of 2000 in the waning hours of the 106th Congress.

The impact on market oversight has been substantial. NYMEX traders, for example, are required to keep records of all trades and report large trades to the CFTC. These Large Trader Reports, together with daily trading data providing price and volume information, are the CFTC’s primary tools to gauge the extent of speculation in the markets and to detect, prevent, and prosecute price manipulation. CFTC Chairman Reuben Jeffrey recently stated: “The Commission’s Large Trader information system is one of the cornerstones of our surveillance program and enables detection of concentrated and coordinated positions that might be used by one or more traders to attempt manipulation.”

In contrast to trades conducted on the NYMEX, traders on unregulated OTC electronic exchanges are not required to keep records or file Large Trader Reports with the CFTC, and these trades are exempt from routine CFTC oversight. In contrast to trades conducted on regulated futures exchanges, there is no limit on the number of contracts a speculator may hold on an unregulated OTC electronic exchange, no monitoring of trading by the exchange itself, and no reporting of the amount of outstanding contracts (“open interest”) at the end of each day.” 1

Then, apparently to make sure the way was opened really wide to potential market oil price manipulation, in January 2006, the Bush Administration’s CFTC permitted the Intercontinental Exchange (ICE), the leading operator of electronic energy exchanges, to use its trading terminals in the United States for the trading of US crude oil futures on the ICE futures exchange in London – called “ICE Futures.”

Previously, the ICE Futures exchange in London had traded only in European energy commodities – Brent crude oil and United Kingdom natural gas. As a United Kingdom futures market, the ICE Futures exchange is regulated solely by the UK Financial Services Authority. In 1999, the London exchange obtained the CFTC’s permission to install computer terminals in the United States to permit traders in New York and other US cities to trade European energy commodities through the ICE exchange.

The CFTC opens the door

Then, in January 2006, ICE Futures in London began trading a futures contract for

West Texas Intermediate (WTI) crude oil, a type of crude oil that is produced and delivered in

the United States. ICE Futures also notified the CFTC that it would be permitting traders in the United States to use ICE terminals in the United States to trade its new WTI contract on the ICE Futures London exchange. ICE Futures as well allowed traders in the United States to trade US gasoline and heating oil futures on the ICE Futures exchange in London.

Despite the use by US traders of trading terminals within the United States to trade US oil, gasoline, and heating oil futures contracts, the CFTC has until today refused to assert any jurisdiction over the trading of these contracts.




Persons within the United States seeking to trade key US energy commodities – US crude oil, gasoline, and heating oil futures – are able to avoid all US market oversight or reporting requirements by routing their trades through the ICE Futures exchange in London instead of the NYMEX in New York.

Is that not elegant? The US Government energy futures regulator, CFTC opened the way to the present unregulated and highly opaque oil futures speculation. It may just be coincidence that the present CEO of NYMEX, James Newsome, who also sits on the Dubai Exchange, is a former chairman of the US CFTC. In Washington doors revolve quite smoothly between private and public posts.

A glance at the price for Brent and WTI futures prices since January 2006 indicates the remarkable correlation between skyrocketing oil prices and the unregulated trade in ICE oil futures in US markets. Keep in mind that ICE Futures in London is owned and controlled by a USA company based in Atlanta Georgia.

In January 2006 when the CFTC allowed the ICE Futures the gaping exception, oil prices were trading in the range of $59-60 a barrel. Today some two years later we see prices tapping $120 and trend upwards. This is not an OPEC problem, it is a US Government regulatory problem of malign neglect.

By not requiring the ICE to file daily reports of large trades of energy commodities, it is not able to detect and deter price manipulation. As the Senate report noted, “The CFTC's ability to detect and deter energy price manipulation is suffering from critical information gaps, because traders on OTC electronic exchanges and the London ICE Futures are currently exempt from CFTC reporting requirements. Large trader reporting is also essential to analyze the effect of speculation on energy prices.”

The report added, “ICE's filings with the Securities and Exchange Commission and other evidence indicate that its over-the-counter electronic exchange performs a price discovery function -- and thereby affects US energy prices -- in the cash market for the energy commodities traded on that exchange.”


Hedge Funds and Banks driving oil prices

In the most recent sustained run-up in energy prices, large financial institutions, hedge funds, pension funds, and other investors have been pouring billions of dollars into the energy commodities markets to try to take advantage of price changes or hedge against them. Most of this additional investment has not come from producers or consumers of these commodities, but from speculators seeking to take advantage of these price changes. The CFTC defines a speculator as a person who “does not produce or use the commodity, but risks his or her own capital trading futures in that commodity in hopes of making a profit on price changes.”

The large purchases of crude oil futures contracts by speculators have, in effect, created an

additional demand for oil, driving up the price of oil for future delivery in the same manner that additional demand for contracts for the delivery of a physical barrel today drives up the price for oil on the spot market. As far as the market is concerned, the demand for a barrel of oil that results from the purchase of a futures contract by a speculator is just as real as the demand for a barrel that results from the purchase of a futures contract by a refiner or other user of petroleum.

Perhaps 60% of oil prices today pure speculation

Goldman Sachs and Morgan Stanley today are the two leading energy trading firms in the United States. Citigroup and JP Morgan Chase are major players and fund numerous hedge funds as well who speculate.

In June 2006, oil traded in futures markets at some $60 a barrel and the Senate investigation estimated that some $25 of that was due to pure financial speculation. One analyst estimated in August 2005 that US oil inventory levels suggested WTI crude prices should be around $25 a barrel, and not $60.

That would mean today that at least $50 to $60 or more of today’s $115 a barrel price is due to pure hedge fund and financial institution speculation. However, given the unchanged equilibrium in global oil supply and demand over recent months amid the explosive rise in oil futures prices traded on Nymex and ICE exchanges in New York and London it is more likely that as much as 60% of the today oil price is pure speculation. No one knows officially except the tiny handful of energy trading banks in New York and London and they certainly aren’t talking.

By purchasing large numbers of futures contracts, and thereby pushing up futures

prices to even higher levels than current prices, speculators have provided a financial incentive for oil companies to buy even more oil and place it in storage. A refiner will purchase extra oil today, even if it costs $115 per barrel, if the futures price is even higher.

As a result, over the past two years crude oil inventories have been steadily growing, resulting in US crude oil inventories that are now higher than at any time in the previous eight years. The large influx of speculative investment into oil futures has led to a situation where we have both high supplies of crude oil and high crude oil prices.

Compelling evidence also suggests that the oft-cited geopolitical, economic, and natural factors do not explain the recent rise in energy prices can be seen in the actual data on crude oil supply and demand. Although demand has significantly increased over the past few years, so have supplies.

Over the past couple of years global crude oil production has increased along with the increases in demand; in fact, during this period global supplies have exceeded demand, according to the US Department of Energy. The US Department of Energy’s Energy Information Administration (EIA) recently forecast that in the next few years global surplus production capacity will continue to grow to between 3 and 5 million barrels per day by 2010, thereby “substantially thickening the surplus capacity cushion.”

Dollar and oil link

A common speculation strategy amid a declining USA economy and a falling US dollar is for speculators and ordinary investment funds desperate for more profitable investments amid the US securitization disaster, to take futures positions selling the dollar “short” and oil “long.”

For huge US or EU pension funds or banks desperate to get profits following the collapse in earnings since August 2007 and the US real estate crisis, oil is one of the best ways to get huge speculative gains. The backdrop that supports the current oil price bubble is continued unrest in the Middle East, in Sudan, in Venezuela and Pakistan and firm oil demand in China and most of the world outside the US. Speculators trade on rumor, not fact.

In turn, once major oil companies and refiners in North America and EU countries begin to hoard oil, supplies appear even tighter lending background support to present prices.

Because the over-the-counter (OTC) and London ICE Futures energy markets are unregulated, there are no precise or reliable figures as to the total dollar value of recent spending on investments in energy commodities, but the estimates are consistently in the range of tens of billions of dollars.

The increased speculative interest in commodities is also seen in the increasing popularity of commodity index funds, which are funds whose price is tied to the price of a basket of various commodity futures. Goldman Sachs estimates that pension funds and mutual funds have invested a total of approximately $85 billion in commodity index funds, and that investments in its own index, the Goldman Sachs Commodity Index (GSCI), has tripled over the past few years. Notable is the fact that the US Treasury Secretary, Henry Paulson, is former Chairman of Goldman Sachs.

F. William Engdahl is an Associate of the Centre for Research on Globalization (CRG) and author of A Century of War: Anglo-American Oil Politics and the New World Order. He may be contacted at info@engdahl.oilgeopolitics.net


1 United States Senate Premanent Subcommittee on Investigations, 109th Congress 2nd Session, The Role of Market speculation in Rising Oil and Gas Prices: A Need to Put the Cop Back on the Beat; Staff Report, prepared by the Permanent Subcommittee on Investigations of the Committee on Homeland Security and Governmental Affairs, United States Senate, Washington D.C., June 27, 2006. p. 3.