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A Caller Explains Cap and Trade

BEGIN TRANSCRIPT

RUSH: Naugatuck, Connecticut. This is Patty. Nice to have you on the program. Hello.

CALLER: Good afternoon, Rush. Thank you for taking my call.

RUSH: You bet.

CALLER: I wanted to just talk about one thing, and I'm going to try to talk about it as fast as I can because there's so much to it, but it's the cap trade one segment about carbon being the new derivative for Wall Street. It's my understanding in reading some of the things that I have that Wall Street is pushing this cap-and-trade bill, and they're looking to set up a new system, now, for carbon derivatives. The cap and trade will actually make atmospheric carbon a market value commodity, and the cap and trade will allow them to make this a derivative once this is into law. They also predict that the cap and trade will be the biggest of any commodities derivatives within the next five years, estimated at approximately $2 trillion.

RUSH: Now, wait a second here. I thought Geithner and Barney Frank and all these other watchdogs had eliminated derivatives because they're too (doing Barney Frank imitation) "wrisky".

CALLER: Yes. But they're not. 'Cause I understand the derivatives in 2007 had a market value of $681 trillion, and that would be ten times the gross domestic product of the entire economy, and the derivatives, 90% of the time, I understand they're not regulated, there's no paper trail, and they don't even know exactly how much the derivative market is. They're estimating a worldwide derivative market to 300 to $400 trillion. And it's my understanding that the cap and trade will allow two things to happen. The derivatives markets will be based on two instruments. The first instruments will be allowing the carbon -- will permit -- it will be sort of like the nuts-and-bolts of the cap-and-trade scheme. The cap and trade government would issue permits that would allow a company to emit a certain amount of greenhouse gases. Companies that emit can buy from another company that didn't emit as much, and then there are also be the carbon offsets, which will allow companies to emit greenhouse gases in excess of federally mandated cap if they invest in projects that cut emissions somewhere else in the world.

RUSH: That is exactly right. That's exactly how cap and trade works. It's an expansion of the old pollution credits that have been around for a long time, but the government will arbitrarily establish the carbon emissions level for every business. And then they'll start trading these emissions as they're either going to go above the limit, or beneath it. And you're right: Wall Street, predominantly, I think, Goldman Sachs, will be right in there mediating and profiting on both sides of these trades.

CALLER: And I understand it will be international.

RUSH: Well, yeah, but there was a warning from somebody, a guy at the University of Montana who is a Nobel prize winner, and he's a climatologist. I'm having a mental block on his name, but he said cap and trade will destroy the US economy. It will destroy it regardless. But especially if the rest of the world doesn't join us, because all we're going to be doing is penalizing ourselves, and essentially putting a cap on our own growth. And if the rest of the world doesn't do that, then we are cooked. And this is what the climate conference in Copenhagen in December is largely -- not totally -- but largely about this. The cap-and-trade program, and Obama… they're probably not going to have cap and trade by the time he goes over there, so they're lowering expectations. But, no, it's every bit as bad as you describe. It's every bit as damaging to this economy as Obama's health care plan is. Pelosi's. Whatever.

END TRANSCRIPT

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