Category Archives: Economy

Liquidity Lunacy

America, Debt, Economy, Europe, Inflation

“The world’s major central banks banded together Thursday to flood global money markets with massive amounts of U.S. dollars, in hopes of taming a major source of the tensions rocking the financial system.
[Global Power Boost chart]

In a concerted move, the U.S. Federal Reserve said it will expand or introduce measures to shuttle dollars to major European central banks, the Bank of Canada and the Bank of Japan, so that those banks can provide short-term dollar funding to commercial banks. Officials in South Korea, Hong Kong, Taiwan and other markets also pledged to inject more money into their financial systems.

The central banks’ moves came in the wake of a meltdown in global financial markets as short-term funding markets seized up and investors piled into U.S. Treasury bills in an unprecedented rush to safety. Concerns about redemptions in the $3.6 trillion money-market industry — a key provider of liquidity to short-term funding markets — and rising strains in the banking system had sent short-term funding rates sharply higher Wednesday. …

The U.S. Fed boosted its U.S. dollar swap line with foreign central banks by $180 billion. (The swap line is an arrangement through which foreign central banks can get U.S. dollars from the Fed.)”

[Snip]

I’m no economist, but as a devotee of Austrian economics, I can’t see how more credit is helpful when the proper correction ought to involve a continued contraction of the hitherto orgiastic lending exuberance.

Energy Independence Idiocy

Economy, Energy, Free Markets

I’ve spoken frequently on BAB about the folly of “Energy Independence Isolationism,” including about comparative advantage:

“The idea of trade is that everyone does what he is best and most efficient at, and exchanges the products of that labor for stuff others do better and cheaper. To aim for self-sufficiency is to aim for bankruptcy.”

John Stossel expounds on the concept in “The Idiocy of Energy Independence”:

“It’s amazing how ideas with no merit become popular merely because they sound good.
Most every politician and pundit says ‘energy independence’ is a great idea. Presidents have promised it for 35 years. Wouldn’t it be wonderful if we were self-sufficient, protected from high prices, supply disruptions and political machinations?
The hitch is that even if the United States were energy independent, it would be protected from none of those things. To think otherwise is to misunderstand basic economics and the global marketplace.
To be for ‘energy independence’ is to be against trade. But trade makes us as safe. Crop destruction from this summer’s floods in the Midwest should remind us of the folly of depending only on ourselves. Achieving “energy independence” would expose us to unnecessary risks — such as storms that knock out oil refineries or droughts that create corn — and ethanol — shortages.
Trade also saves us money. ‘We import energy for a reason,’ says the Cato Institute’s energy expert, Jerry Taylor, ‘It’s cheaper than producing it here at home. A governmental war on energy imports will, by definition, raise energy prices‘. Anyway, a ‘domestic energy only’ policy (call it ‘Drain America First’?) is a fantasy.”

Read the rest here.

Bankrolling Fannie & Freddie Adds $5 Trillion to National Debt

Capitalism, Economy, Inflation, Media, Socialism

Bankrolling Fannie & Freddie will add $5 trillion to the national debt (which stands at $9.5 trillion). So says the brilliant Jim Rogers. (And you wondered why the dollar’s dying and our assets are devaluing by the day? Still, the band of fools, with Obama and McCain in the lead, plays on.)

Rogers also tells a CNBC anchor that if she doesn’t understand that taxpayers must not be defrauded to prop-up these fraudsters in perpetuity—she should get another job. Let these fascistic entities fail.

Updated: Energy Independence Isolationism

Economy, Energy, Environmentalism & Animal Rights, Free Markets

About “oil independence,” I wrote the following in September of last year:

“I can never understand the protectionist, bellyaching about oil independence. Has anyone heard of trade? Perhaps if we traded more with Iran, instead of boycotting its wares, Iranians would be less belligerent. Trade is the best antidote to war. Think clearly: Iran has to sell its oil. That’s its livelihood. We need to buy it. Voila! Trade! Oil independence is a foolish leftist notion. Do I grow carrots in my backyard so as to become less dependent on Costco? Why would I? Costco needs to sell its fabulous produce; I want to buy it. Case closed.”

About the fallacy and fundamental dishonesty of “energy independence,” Bill Anderson writes this:

“There is something reassuring about the concept of ‘energy independence,’ but the term is much more dishonest than one might think. First, and most important, the United States is part of a world economy, and it is not the case that because one product is produced within the borders of this country the United States is “independent” of what happens elsewhere in the world. Indeed, many people who call for “energy independence” have no problem in calling for U.S. troops to be sent around the world for military operations because they insist that global issues are our issues, too. (My comments are not an endorsement of such policies, but rather an attempt to point out that people who call for energy independence need to be consistent in their thinking.)

Second, one must remember that trade itself is by nature a peaceful activity, spurred on by mutual benefits to all parties involved. It is in Americans’ interest to trade with all nations, including those in the Middle East. Before the Gulf War of 1991, the United States was trading peacefully with Iraq and other nations of the region. The turmoil in Iraq-U.S. relations was more the result of U.S. policies than anything hatched by the late Saddam Hussein, as cruel and dictatorial a person as he was. Furthermore, even if this country could theoretically produce all necessary fuel domestically, the cost to taxpayers and consumers would be extremely high and would greatly lower Americans’ standard of living and increase the rate of poverty here.

Energy ‘independence’ is a foolish term that has no bearing in reality. Such a regime of “independence” would require government to expand its powers of taxation and regulation far beyond where those powers operate today, and Americans would be made substantially poorer for the effort.

There is another way. The United States could return to being a peaceful trading partner with countries of the world, no matter what the ideology of their governments. In the long run, there would be no call for ‘energy independence,’ because trade obviously would be the better and wiser route to take.”

If you haven’t yet, do read “The Goods On Gas.”

Update (June 22): COMPARATIVE ADVANTAGE. When I see my frugal, time-deprived husband change the oil in his car, I begin talking about comparative advantage. Yes, in addition to the highly specialized work he does, the man is more than able to do most things around the house. However, how viable is that? The time he devotes to the oil change could have been better utilized to do more lucrative work. Or to play the guitar, also the second greatest love of his life. (We hope)

The idea of trade is that everyone does what he is best and most efficient at, and exchanges the products of that labor for stuff others do better and cheaper. To aim for self-sufficiency is to aim for bankruptcy. The Saudis are good at getting oil out of the ground. Their installations showcase magnificent high-tech equipment. Thanks to the environmental ideologues the US is run—and overrun—by, we’ve fallen by the way. So now we want to stop trading?

According to CNN:
“America now uses nearly 21 million barrels of oil a day, a quarter of total world consumption. It imports nearly 60 percent of it. Domestic production has been falling for 35 years.”

Importing what we need is good. But halting production for political reasons is not.

Speaking of the best of technology: Did anyone see the CNN and interviews with Anadarko Petroleum? If only the f-ck-faces in Congress left it up to companies like this and their teams of geologists and engineers, we’d have oodles of gas in no time.

On one of their many rigs drilling goes on thirty-three thousand feet–six miles down. On the day the CNN correspondent visited, they were “down 11,000 feet, two miles below the ship.” That’s astonishing.

Anadarko Petroleum has

“Remotely operated vehicles, or ROVs, [that] reveal what is happening on the sea floor. Global positioning systems and thrusters underneath the ship keep it in place over the wellhead. Computerized lifts pull pipe 270 feet at a time with nothing more than the flick of a wrist.”
“The ship and crew cost nearly $300,000 a day, each deep water site [is] a huge gamble, hundreds of millions for what could be a dry hole.”

These vilified companies are incredible. Read the transcripts here for more about the wherewithal of one of our oil companies. If only the putrid politicians and their gangrenous pals would let the likes of Anadarko Petroleum do what they do best. Take care of business.

On the other hand, if I were being called every other day to face the congressional cockroaches, so as to satisfy the pitchfork-wielding folks, I’d do an Atlas Shrugged. Liquidate, sell, get out of the business.