Category Archives: Energy

O’s Argument From Inflation

Barack Obama, Economy, Energy, Federal Reserve Bank, Inflation

“Game. Set. Match, Mitt Romney,” last night, did not mean that the arguments made during the second presidential debate were not both tedious and hopeless for liberty lovers.

I did perk my ears, though, when Barack Obama made an argument from inflation. Mitt Romney failed or was prohibited from following-up (although I’m not suggesting that he had the philosophical wherewithal with which to respond).

Obama suggested that an earlier drop in gas prices was due to America’s economic straits (partially correct), and was thus a bad thing (completely incorrect):

CROWLEY: Mr. President, could you address, because we did finally get to gas prices here, could you address what the governor said, which is if your energy policy was working, the price of gasoline would not be $4 a gallon here. Is that true?
OBAMA: Well, think about what the governor — think about what the governor just said. He said when I took office, the price of gasoline was $1.80, $1.86. Why is that? Because the economy was on the verge of collapse, because we were about to go through the worst recession since the Great Depression, as a consequence of some of the same policies that Governor Romney’s now promoting.

In Austrian economics, deflation, “a sustained decrease of the price level,” is a good and natural market response.

Writes Doug French “In Defense of Deflation”:

Lower prices increase demand; they do not reduce or delay it. That’s why more and more people own flat-screen TVs, cellular telephones, and laptop computers: the prices of these goods have fallen, and people with lower incomes can afford them. And there are more low-income people than high-income people.
Lower prices don’t mean lower profits; nor do they mean that employees will be laid off. More demand for a good or service means more employees needed to produce those goods and services. “There is no reason why inflation should ever reduce rather than increase unemployment”
“Deflation is one of the great scarecrows of present day economic policy and monetary policy in particular”…

And here’s Guido Hülsmann on “The Economics of Deflation”:

Mercantilism Vs. Militarism

America, China, Energy, Neoconservatism, Trade

When a world power such as China pursues its national, economic interests, instead of busying itself with unprovoked, non-defensive wars, as America does—analysts in the US call it a free rider.

“China,” pontificates Niall Ferguson, “contributes almost nothing to stability in the oil-producing heartland of the Arabian deserts and barely anything to the free movement of goods through the world’s strategic sea lanes. …In terms of geopolitics, China today is the world’s supreme free rider.”

So that is what the US has been doing in the Middle East! Fostering “the free movement of good” there. I suspect the millions of Iraqis who’ve been displaced and murdered pursuant to our invasion in 2003 would dispute that notion.

Chinese mercantilism is not free trade, but is it not better than American militarism?

Step Closer to Nationalizing Natural Gas

Barack Obama, Constitution, Energy, Ethics, Government, Regulation, Socialism

As America, led by the mindless media, fusses and frets over the parasites and the prostitutes—the poor women have been stiffed by the worms, as in not always paid for services rendered—news comes, via the SPPI Blog (hat tip to Roger Chaillet), that BHO has surreptitiously issued a Presidential Executive Order:

The Supporting Safe and Responsible Development of Unconventional Domestic Natural Gas Resources Executive Order seeks to create what amounts to a Presidential super committee that will oversee the regulation and development of the ‘unconventional’ natural gas industry for the purpose of ensuring a long-term natural gas supply for the United States, as well as to do so in a safe and environmentally responsible manner.

Expect energy costs to go up some more, although the last is the least of our problems.

Crude’s Cheap; Government Is Expensive

Debt, Energy, Inflation

In “THE GOODS ON GAS,” it was explained that the deliberate and destructive policies of deficit spending are responsible for the steady rise in the prices of all commodities, crude included. This is so because deficit spending is “accompanied by an enormous increase in the stock of money,” as economist Henry Hazlitt explained in Economics in One Lesson.

Prices are rising due to the sustained policies of credit expansion pursued by a profligate government. More fiat currency in the system means that every unit is worth less. The coin is debased.

All correct, except for one thing, says Forbes’ Louis Woodhill.

Oil prices aren’t high right now. In fact, they are unusually low. Gasoline prices would have to rise by another $0.65 to $0.75 per gallon from where they are now just to be “normal”. And, because gasoline prices are low right now, it is very likely that they are going to go up more—perhaps a lot more. What the politicians, analysts, and pundits are missing is that prices are ratios. Gasoline prices reflect crude oil prices, so let’s use West Texas Intermediate (WTI) crude oil to illustrate this crucial point.
As this is written, West Texas Intermediate crude oil (WTI) is trading at $105.88/bbl. All this means is that the market value of a barrel of WTI is 105.88 times the market value of “the dollar”. It is also true that WTI is trading at €79.95/bbl, ¥8,439.69/barrel, and £67.13/bbl. In all of these cases, the market value of WTI is the same. What is different in each case is the value of the monetary unit (euros, yen, and British pounds, respectively) being used to calculate the ratio that expresses the price.
In terms of judging whether the price of WTI is high or low, here is the price that truly matters: 0.0602 ounces of gold per barrel (which can be written as Au0.0602/bbl). What this number means is that, right now, a barrel of WTI has the same market value as 0.0602 ounces of gold. …

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