• "Carbon will be the world's biggest commodity market, and it could become the world's biggest market overall."
  - Barclays Capital, June 2007
• Carbon credits seem to be another way that statists can create credit/dollars out of thin air (no pun intended).
• This chart shows the high of 17.27 set in February 2011, which was the cyclical high for most commodities.
• The major low was 3.10 set in March 2013, from which the rally made it to 6.40 in July.
• At 5.72 now, taking out 5.38 sets the next leg of the bear market.

Wrap:

Carbon credits seem to be a figment of intellectuals seeking a way to control people, who have always needed to be controlled. For their own sake, of course. It is very much part of the recent cult of "global warming" and/or "climate change", which has been uncritically accepted and promoted by most governments around the world. The harshness by which sceptics are treated has not been seen since the Vatican used the threat of death to defend the concept that the Earth was the centre of the solar system.

Funded by a government arts fund, activists in Australia are now staging a play "Kill Climate Deniers" and in the US, Robert F. Kennedy accuses scepticism as "treasonous" and wants to throw his political opponents in jail. In 2009 economist, Paul Krugman, described scepticism as "treason against the planet".

However, in the last experiment in authoritarian government the bureaucracy's insatiable demand for money offered absolution in the form of "indulgences". That came to an end in the early 1600s and today's form of indulgences is the concept of Carbon Emission Credits. Pay some money and your sins/footprints are absolved.

The chart of the price of Carbon Emissions peaked with most commodities in 2011. Most commodities have been weak and a global recession will extend the decline. Market forces will seriously weaken pricing schemes for carbon emissions. A changing political tide will also take it down. Perhaps into the dustbin of history.

Direction:

The climate phenomenon is part of one of the most ambitious experiments in authoritarian government in history. This is placing the concept of constitutional limits in perspective. The prime reason for a constitution has always been to constrain those who would use the institutions of government to impose arbitrary ambition. History instructs, sometimes forcefully, that the ultimate goal of any bureaucracy has been absolute control of society and its money.

The final corruption of Rome from a republic to a police state was accomplished in the third century. Through chronic inflation the wealth of the empire was destroyed and the collapse was general. The promotion of the state had been based upon the "Genius of the Emperor".

The next such experiment was inspired by the "Infallibility of the Pope", which peaked in the early 1600s. After a hundred years of economic intrusion and confiscation of wealth through chronic inflation, the experiment was rejected by the public.

This time around, statists chose Keynesian economics that corrupted central banking to fund yet another experiment in unlimited government. It has run for more than a hundred years and has critically impaired the free-market system. However, its excesses on the financial side have always aroused the skepticism of market veterans who have been fully aware of the consequences deliberate and chronic inflation.

In this regard, the next contraction seems to be starting and the public will soon see that the attempt to create enduring prosperity by spending everyone's money is not practical. And that is what is really needed to end the experiment.

On the climate side, authoritarians did not forecast that temperatures would flat line. On the latest report this has run for 18 years, which confirms that climate modeling has been an arbitrary exercise in promoting climate concerns, a modern form of religious hysteria. Veteran earth scientists have always been sceptical, but what is needed is the public's understanding that the ambition to "manage" the climate is just another control tool. More taxation and regulation will "cure" the health of the planet. Really?

On the financial side, the original intention of the Fed was to prevent severe setbacks in the financial markets. The reason for this was to prevent the subsequent recessions. The Fed started operations in January 1914 and, according to the NBER, there has been 20 recessions since that date. The Federal Reserve System has failed in its mandate. What's more the establishment has demonstrated an inability to forecast even the biggest setbacks. At the height of the 1873 Bubble nothing could go wrong, because the US was on a fiat currency and did not have a central bank. In 1929 the official story was that nothing could go wrong, because the US did have a central bank. At the height of the 2007 Bubble, nothing could go wrong because there was a "Dream Team" of economists at the central bank.

In any century there has been veteran traders or financiers that have been sceptical of the establishment's convictions about intervention.

An unusually ambitious experiment in authoritarian government has been pushing unsupportable policies in the financial markets and in climate research. Mother Nature is about to undo two of the biggest promotions in history. All that is needed is another financial contraction and another cold winter and the public will realize that the promotions are just plain stupid.

In the early 1600s, a similar discovery about intrusive government described it as "Tyrannical Duncery".

Temperature and CO2