By Larry Leonard
April 21, 2012 — You have been fed a load of crap. It comes to you in two types. The first is in the form of a lie. Something is this, and the liars tell you that it is that. The second type of lie is more subtle, and is created by omitting information from a story. These are known as lies of co-mission and lies of omission. Used simultaneously, they throw a blanket of fantasy over reality.
We’ll use energy as a model for this essay, but remember that the process works in education, campaign speeches, the presentation of history, economics — you name the topic and somewhere in each information pot you will find deception of the type described above
Energy and the American Economy
All this week, from all the news sources in America, you have been misinformed by both the liberal MSM and fair and balanced FOX. The MSM did it intentionally. FOX did it unintentionally. To set up this section, here’s something you’ve heard for weeks: “The president says that if he opened up government energy locations, it would not lower the price of gasoline.”
That is a beautiful attempt to sidestep the key political issue today by way of what sounds like a reasonable lie about another, related subject. I’ve been waiting for weeks for FOX to pick it up. They haven’t, so it’s time Oregon Magazine did.
We strongly disagree with the premise, itself, because of the blamed villains, Wall Street and Chicago commodity speculators, are a breed with the guts of of a rabbit. Raw greed and fear of loss are their daytime nightmares. They react to rumors in a way that resembles the cover of an old Superman comic book. A giant Martian insect looming in the background and people in the streets fleeing while screaming. But, there are two kinds od commodity speculators. The first one is the best one, and is the large American corporation that requires a given commodity to do what they do. Wheat flour or corn to make cereal. Ore to make a product like steel, bronze, copper or whatever. Fuel to fly airplanes, coal to generate most of the electricity for most of the big cities, natural gas to power factories and generators to make what they make, and so forth. Their speculation has to do with protecting their future access to the commodity they need. Making sure they can get it at a price they can afford.
The other type of commodity speculator is the one you see in the movies. He or she does it to make money, and for no other reason. They are the biggest private gamblers on Earth. Along with those like George Soros who speculate in a special variety of government securities known as “money” (the shifting values of say, the U.S. Dollar vs. other national money units), this class of speculator lives in a world which could be described as an international insane asylum for accountants. Their entire business is made of statistics and trends. Numbers, climate effects, earthquakes, the new military dictatorship that just took over some African nation that used to have a sane economy, but which will now turn into a money hole for a rapidly expanding mililtary that will redirect the flow of financial assets from doing business to doing war. (They will need ten million more AK47s to take out the neighboring Tutu Tribe.
Then there is Sanity
A key factor in all the above is the cost of energy. All production and distribution of all goods involves dynamism. Dynamics is a word that describes how much and what kinds of things are happening. The dynamics of your lawn mower involve a description of what the parts are doing. This is also true for your nation’s national economy. What the parts are doing is the dynamic.
What Germany was doing after WWI resulted in loaves of bread that cost a thousand Marks (German dollars.) Those were inflationary dynamics. Deflationary economic dynamics create dollars that will buy more than they did last year. The way you can personally discover the nature of the dynamics of your community is simple. You pick three products in a given commodity area. It could be luxrury boats, private airplanes and Rolls Royces if you live in the Hamptons or Beverly Hills. Or, if you live in small town America, you could use a loaf of bread, a dozen eggs and a gallon of milk. .
Your final comparison must result from the original brands you studied.
Just add the retail prices of the three items and write them down. Six months to a year later, do the same thing with the same three, again. If the group retail price is lower, you have deflation. You are getting more for your money. If the group price is higher, you have inflation. You are getting less for your money.
Now, you figure out why
A drought in the midwest lowered the size of the corn harvest? That probably raised the price of corn. A strange virus killed a slew of chickens in Ohio. That probably raised the price of eggs. But, if that isn’t obvious, then something else caused that price inflation. (Deflation of the value of your dollar.)
Those wonderful blue collar type craftsmen and women who build luxury boats for the rich know what they pay for bread, eggs and milk, but too often commit class warfare against their employers and the buyer by voting for liberals who are praised for raising the taxes on the boat company and the purchaser of the vessel. If you make it impossible for your employer to build the product and still make a profit, you have just cut your own throat. You are laid off and go on unemployment and other government programs. You have just changed from a net revenue source for government into a net expense for government. When half the citizens of your nation are financially supported by money taxed from other citizens, leaving that other half to provide the tax revenues to do it, the nation has reached a wall. On one side of this wall is increased taxes on the job-providers and employees like you, which will reduce the capacity of those employers to finance production areas like new machines and added workers. (Plus raise the prices on the things you buy. The money government-supported people need is being created by printing more money.)
Printed money isn’t “real.” It always causes inflation. What you buy always rises in price when it is bought by a great many people using fake dollars. Only dollars earned during the private production of goods or services are “real.” If your inflation/deflation test indicates that you are suffering from a dollar that is worth less, the problem is being caused by natural disasters and wars that have restricted the commodities you used in the test, by shortages generated by human activity, like war or excess spending by government or by unions who demand too much and restrict or shut down production during their protests or strikes. It’s nature, stupid government practices or people like you who caused the problem
In the case of government over spending and excessive printing of phony dollars, the cause is the people who voted for the spending and printing villains that now are in power.
Now, to Energy
Dynamics is about what is happening, where it is happening and why. The chief reasons why a given energy source is economically sound or unsound are availability and cost. The cost per energy unit (horsepower, kilowatt) is very important. Carbon-based fuels provide more use per unit of cost than all but one of the so-called “green” fuels.
The one cost-effective green energy source is hydroelectric power. Compared to windmills, solar cells, tidal buoy generators and rabbits running on rubber belts to spin generators, carbon-based energy sources are dirt cheap. Coal, natural gas and petroleum give you an amount of energy for your car or your home furnace and air-conditioner that is matched in price only by the dams. The environmentalists are working daily in Oregon to remove as many dams as they can. They would love to remove most if not all of the hydroelectric impoundments on the Columbia River system. They blocked the recent attempt to build enhanced natural gas facilities near Astoria. Along with the liberals presently inhabiting the White House the the U.S. Senate, they want to keep choking the coal industry until it is dead. They are doing everything they can to block new exploration and development of public waters and lands.
Every time they succeed, you are forced to pay two to ten times the cost of hydroelectric and carbon-based fuels to drive your car, heat your home or run the machines in our factories. When you add these sky-high energy prices to taxation that damages or destroys corporate profits (and so eliminates the reason for private investors to invest in private companies) you have decreased revenues to the government with the subsequent loss of manufacturing and service providing companies. You have increased the number of people who survive on government handouts and decreased the number of people who pay taxes.
In this nation, in this era, the economy is in your hands
There is more oil in midwest and mountain state shale and sand deposits than Saudi Arabia has. There is more coal in the United State than most of the rest of the nations of the Earth, combined. The natural gas supply in North America would, if tapped, supply the nation’s basic energy needs for one hundred (100) years by itself.. Except for price reasons (foreign sources using slave labor might be able to provide these commodities at a lower cost per unit at times) natural gas is there, beneath your feet, waiting. If released for use, with our own energy companies happily digging up energy all over North America, the long-term downward pressure on energy prices would guarantee that no foreign nation by threat of war or cartel could force us to pay through the nose.
This the most fascinating part of all.
The argument by the president that drilling won’t lower gasoline prices is balderdash. Pure baloney. From a speculation standpoint, you now know what those people are like. They shriek in terror on Halloween when a child wearing a mask jumps out from a bush and says, “Boo !!!” The fear of potential losses generated by a massive increase in carbon-based fuels development would scare the living hell out of them. Only the present situation allows them to risk millions of dollars. Restricted national supply is their best ally. A foreign war in the Straits of Hormuz could generate sudden increases in the barrel price of petroleum and make them instant billionaires. The removal of that threat to national supply via the end of ridiculous greenie regulations and government restriction would frighten them into cashing out, not reinvesting in the commodity and going elsewhere to look for quick profits.
Forget what Bill O’Reilly is saying. Forget some government agency created to keep an eye on the oil speculators. Government agencies should be restricted to buying $600 toilet seats and vacationing in Las Vegas. Government agencies always screw up everything they touch, generate graft and in the end create more problems than they solve.
The secret won’t cost a single tax dollar. Just turn the energy companies loose and get out of their way. The speculators will head for the hills. We predict the result would be gasoline that costs a dollar less per gallon within one single year.
And, here’s the topper
When every energy resource company in America from petroleum to natural gas to coal is free to go dig for future energy income, they will need two things to do it: workers and machines.
It is said that the Keystone pipeline from Canada’s shale and sand petroleum deposits to the refineries on the coast of Texas would instantly provide ten thousand private sector jobs. Add to that a dozen gigantic companies who want to drill for natural gas and dig for the new clean coal, and the number of additional jobs would be what? We’ll pick 30,000 more jobs from them. Pick your own number if you don’t like ours. Whatever the almost instant appearance of above average wage paying jobs would be, it would be a sudden financial boom for America. Forty thousand people off unemployment checks and welfare one day — and paying tax revenues to the state and federal government the next?
A reduction of, say, of a quarter billion (probably a very low estimate) dollars going out of government coffers one day — and an increase of the same amount or larger going into those treasuries the next day?
It all now depends on you. If in the fall you vote Democrat, you will sustain the present conditions. If in the Fall you vote for Tea Party type Republicans, what is described just above will happen.
Euro-socialism or a dynamic economic revival.
It’s up to you.