Oil Company Altruism

Regardless of whether the statistics show it or not, our economy is in a recession. Major banks have failed, the government has unwisely bailed out large financial institutions to the tune of 700 billion dollars and may soon bail out the Big 3 automakers, housing prices have drastically fallen, foreclosures have skyrocketed and unemployment numbers are starting to creep up. We can all feel it, we all know it, we are in a recession.

So isn't nice of our leading energy companies to come along and offer us such charitable prices at the pump? Just a few months ago gas was hovering between $4.40 and $4.60 in Salem, Oregon where I live. Salem is a boring town unfortunately, so each weekend I wanted to leave for Portland or Eugene. But with those kind of gas prices, I weighed the pros and cons each time. Sitting alone in my apartment on a Saturday night isn't that bad compared to purging my wallet at the gas station.

Nationally, things were little better as the average price hit a record $3.24 a gallon in May of this year. But then Christmas came early. Apparently the oil executives felt guilty about their record setting profits and felt like they should give some of it back to us less fortunate. This massive outpouring of altruism has lead gas prices to plummet. In Salem it's $1.99 a gallon, the cheapest I've seen since I was in high school. Nationally gas prices have fallen to $1.89 a gallon. For those of us struggling to pay rent on time, the oil companies may be all that's keeping us afloat. And it doesn't end there. Oil, which was around $150 a barrel has plummeted well below $100. Apparently OPEC has gotten into the Holiday spirit too.

Now unless you are on a record setting pace for denseness, you realize I'm joking around. The oil companies are still as greedy as ever. It's simply they can't charge as much because of good old supply and demand. Honestly think about it, why did the oil executives all of a sudden start to raise prices around the turn of the century? Did they just up and become greedy? Of course not, they've been greedy the whole time, they were just restricted by the market. And now, our inflationary boom has collapsed (financial crisis, housing bubble) and the deflationary adjustment has come. This is bad, but can be good too. Sure investment and wages will go down, and unemployment will go up, but prices should go down as well (that is unless the government tries to keep prices from adjusting, like they did in the Great Depression, which will lead to yet another depression). Eventually (again under the delusional assumption that the government stays out) the economy will stabalize and everything will return to normal.

Now remember before the financial crisis and bailouts and change talk and all that. Remember back to this summer when all the talk was about the housing crisis and oil prices. The oil company's were gouging us! Hang the CEO's from the gallows! The hysteria was completely out of control. It should be no surprise that those leftists at the DailyKos jumped into the muck, but so did Bill O'Reilly and many faux right wingers. Congresswoman Maxine Waters even, to her eternal shame, threatened to nationalize the entire oil industry!

Well what now Maxine? What now Bill? What now left wing nuts at the DailyKos? Will you thank the oil companiess for their collective genoristy? Will you take a quick break from your current outrage over the supposed lack of regulation in our financial markets to apologize for all the bad things you said about them? You know what, save the the apologies and save the gratitude. Here's another idea, why don't you all just realize you don't know the first thing about economics and shut the hell up!

Did Osama Bin Laden Win?

The stock market just fell below 9000 for the first time since the 90's after the Dow dropped another 679 points today. The stock market has already fallen almost 40% from its all time high of 14164 in October 9th of 2007 and will probably continue to fall. Huge banks such as Bear Stearns and Lehman Brothers have failed along with insurance giants like AIG. Mortgage foreclosures are up, inflation is up and Americans still save less than 0% of their income. That brilliant $700 billion dollar bailout package doesn't seem to be having its desired effect.

All of this was predictable and I take little pride in the fact I predicted it given how obvious it was (and how bad it could get). Economics is an extremely complicated discipline, but the basics are pretty simple. You cannot dramatically lower taxes, dramatically increase spending (Medicare expansion, No Child Left Behind, Department of Homeland Security, etc.) and start two wars with out bankrupting your country. Our government is worse than a teenage girl with her parent's credit card.

What makes this even worse is that not only did we do it to ourselves, but we fell right into our enemy's plan. We executed it to a T. Osama Bin Laden knew very well he couldn't defeat the United States militarily. What he did know is that he could get us stuck in the Middle East crapping money away fighting endless insurgencies. He bled us. And that was his strategy the whole time! He even stated it publicly saying, "So we are continuing this policy in bleeding America to the point of bankruptcy." He went further and cited Russia, who in the 1980's were bankrupted fighting Bin Laden's insurgents in Afghanistan. Yet we were still too stupid to listen, or at least our politicians were.

So where do we go from here? Well first things first, we have to withdraw our military. Not just from Iraq and Afghanistan, but from the entire world. The quasi-empire can go! As far as Osama Bin Laden is concerned, he'll lose support if the US leaves the region. Radical Islamists will likely turn on their own government instead of worrying about a bunch of infidels on the other side of the planet. Regardless we have bigger problems at home.

We then need to use the saved money to balance the budget. Right now, we just gave a $700 billion dollar bailout to our major financial institutions, but we have no money and our credit line with China is basically maxed out. So we almost assuredly just printed the cash. This crisis will get much worse if we keep that up, the dollar will just collapse and we'll have runaway inflation during a recession. We need to keep taxes as low as possible for the time being and simply be patient while the market liquidates the bad debt. It will take time and it will hurt, but there is no such thing as a free lunch. You have to pay for your mistakes. And the United States has many mistakes to pay for.