Of empires, collateral and financial fraud

Key Markets report for Thursday, 17 April 2025

In a recent article titled “How stolen Alberta oil keeps creating $9 trillion in fraudulent collateral,” Regan Boychuk made the case that the US invasion of Iraq in 2003 was about keeping Iraqi oil off the world market in order to maximize the value of 175 billion barrels of newly 'proven' Alberta bitumen. Boychuk meticulously traces the events in US and Canadian oil market politics in the lead up to the Iraq invasion and its immediate aftermath, reaching some fairly staggering conclusions. Nevertheless, his analysis is compelling and entirely credible.

The real objective of the Iraq invasion

Boychuk believes that the real objective of the US invasion of Iraq was to keep their cheap production off the market in order to boost the oil prices and maximize the value of the collateral in the form of Alberta oil whose production had been ramping up since the late 1990s. “The same day Marines pulled down Saddam Hussein’s statue, completing the occupation, the US officially recognized 175 billion barrels of bitumen reserves as proven and thus legal collateral for private money creation.” Then-US Energy Secretary Edward Abraham told Alberta the same day Marines pulled down Saddam’s statue in Baghdad, ‘From now on, when the Americans talked oil, they would be counting the reserves sitting beneath the forests of northern Alberta.’

If that was indeed the plan, it was successful: when the US invaded Iraq on 20^th March 2003, Brent crude oil was trading at around $25/bbl (it closed at $25.30 that day). By 14 July 2008, Brent peaked at $146.27/bbl. The average price of oil during this period was just over $59/bbl.

This happened - it’s a fact. How it happened is open to interpretations.

As Boychuk documents, the operation was very extensively planned and nearly everything about it was criminal and fraudulent, from the rationale for Iraq invasion (Saddam’s nonexistent weapons of mass destruction) to the way Alberta “proven” oil reserves were tallied up to staggering 175 billion barrels, making it the world’s largest oil field. For comparison, the total of Saudi Arabia’s magical, undepletable oil reserves are supposedly about 260 billion barrels (by today, some sources claim it is closer to 300 billion barrels).

But the even more interesting question is, why was this done and what happened to the collateral? According to Boychuk, the $9 trillion dollars of Alberta oil became legal collateral under Rockefeller banking interests in the United States, noting that Canadian banks typically extend loans against half proven reserves; US banks lend up to 75% or even more.

An epidemic of financial crimes

Apparently, the collateral was used to fuel the housing bubble: “The bulk of the new credit was used to inflate the giant housing bubble…” Less than a year from the US takeover of Iraq, the FBI warned publicly about an “epidemic” of financial crimes that could become “the next S&L crisis.” Those financial crimes followed on from Alberta collateral. The gargantuan, $5 trillion bubble of mortgage debt inflated an epic bubble, whose inevitable bursting precipitated the Global Financial Crisis of 2008.

Few lenders went bankrupt, but eight million American families lost their homes as a consequences. In the aftermath of the crisis, the banking industry was rewarded for the “God’s work” they do in our societies with at least $16 trillion in bailouts as detailed in the 2011 Government Accountability Office audit. Other, independent analyses arrive at higher figures, as much as $29 trillion.

Random events or conspiracies to commit fraud?

It would appear that the banking industry orchestrated fraud of epic proportions. The staggering aspect of this part of our history is just how extensively all this was planned, and we should assume that it was planned. It may be that things just happen, randomly because honest errors, misguided regulation, political opportunism, incompetence and trivial greed. But if all these ingredients consistently benefit one group while harming all others in society, we have to consider the possibility that the group that benefits could be orchestrating the events, formulating the enabling regulatory measures, empowering the “incompetent” politicians, and determining the system of incentives that drives the whole process forward.

Historian Ramsay MacMullen said that in order for us to arrive at a correct interpretation of history, we need to understand the motivations of groups and individuals who shaped it. The events around Alberta oil, Iraq invasion, the housing bubble and the subsequent bank bailouts were not random. At least at some level, they were orchestrated by powerful interests in our society. Much fraud was committed, yet nobody was charged criminally, suggesting that those who benefited the most aren’t subject to law enforcement in the same way that most of the rest of us are. “There is no such thing in economic life as a nonfinancial event”, James Galbraith reminds us, so “Finance is the only way to understand the economy.” At the same time, the powerful interests that benefit through the mechanisms of finance are terribly keen that we can’t properly understand the economy.

Groupthink eco-chamber of economists

The period from 2003 through 2008, I worked as an oil market analyst in an commodities trading company. In that capacity I read hundreds of market analysis reports from many other analysts and institutions, seeking to explain the oil market economics and why the prices moved from $25/bbl to $146/bbl. None of them at all - literally none of them - took the finance aspect into consideration or even suggested the possibility of a conspiracy driving the key developments. And of course, none of them came even close to predicting any of the staggering developments of those years. As I documented in “Mastering Uncertainty in Commodities Trading,” the world’s leading oil market forecasters were closed in a groupthink echo-chamber which produced clever-sounding but worthless analyses, and hopelessly wrong forecasts. Below is the exhibit summarizing their 2003 forecasts:

But even in view of all this, considering a possibility that there could be conspiracies to commit fraud is a bridge too far for many observers and no amount of evidence, direct or circumstantial will dissuade them.

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Today’s trading signals

With yesterday’s closing prices we have the following changes for the Key Markets portfolio: