Friday, March 14, 2008

It's Not Gas Price But Government Inflicted Pain You're Feeling

Actual gas and oil prices haven't risen in decades. If you doubt that, go back to any date you wish since our government ceased backing up our currency with gold.

Gold today sells at a bit more than $1,000 an ounce while oil and gas, respectively, sells at a bit over $100 a barrel and $3.50 a gallon. Thus oil goes for about 10% and gasoline goes for about .0035 percent of an ounce of gold. Thus it is clear that for decades the real prices of these commodities have remained steady in the same proportions.

The dollar price increases for all of these, as well as of most other commodities are illusory. What they really reflect is the drop in the value of our dollars.

When the government stopped backing up our currency with gold it proclaimed that the dollar would have the full faith and credit of the government behind it. And that backup has been losing and is continuing to lose credibility. The loss has been precipitous and it is accelerating.

Behind the collapse of confidence in the dollar is the government's feckless and unending tax and spend policies -- the same policies that our elected officials use for their pet programs and earmarks, aiming to have the public treasury buy constituencies for their reelection. Most elected officials haven't cared as their policies sent American industries and jobs overseas because they assumed that the pain would become widespread enough for the public to focus on what was happening only on their successors' watch after they had moved on.

Another aspect of this has been the appeals to environmentalists that have placed some 85% of our potential sources of domestic oil, both onshore and under the outer continental shelf, off limits for exploration and development. They also have made it impossible to build additional oil refineries, modernize our outdated ones, and to construct nuclear power plants -- all steps that might have reduced energy prices, halted our dependence on oil imports, and stopped or reduced the flow of our cash to the Middle East.

Our politicians love to talk about how they support programs to develop alternate sources of energy. None of these programs are sure to be successful, and the only thing certain about them is that even if they achieve their goals their benefits will be realized in the far distance future. The one program that they have inflicted on us is involves ethanol, a boondoggle that is driving up the price of gasoline, food, and virtually everything else working Americans routinely need.

None of our "leaders" seem to realize that the pain is here and it is here now.

The government is printing and distributing dollars even faster, hoping to prop up our faltering economy a bit longer. Cheapening the dollar faster and accelerating inflation has an added attraction for those who fashion our public policies -- it may enable the government that has no other way to meet the huge debt obligations it has taken on to nominally pay its bills as they become due with dollar worth only a dime or even less. Of course the flip side of this is that the rest of us will need wheelbarrows full of currency to buy loaves of bread as well as gasoline.

Well folks, the chickens aren't just coming home to roost. They have arrived.

1 comment:

The Gunslinger said...

And shame on me for not buying gold 2 years ago, when I first thought about it. Sigh.