Often we hear newscasters and elected officials speak of the National Debt as though it was simply a problem of finding more money. While that is related to the problem of the national debt, it isn’t the real problem of why the debt exists.
Socialists see the government as the vehicle for redistribution of wealth. They see it as spreading around the money supply so that all share equally and that wealth is not accumulated in the hands of a few. What they fail to realize is that money is not wealth in the true sense. Currency has no value in itself. It simply represents real wealth in terms of what we have to sell. What we produce is the wealth. You can print money all day and not increase wealth. It is only through increased production of products and services that a nation’s wealth increases. That is why communism as a system is such a total failure. If people are simply sharing the money supply, but do not contribute to the production, all we do is erode the value of that which is produced. That is why it so important to do everything that we can to stimulate production and not simply consume it. Consumption without production is destruction.
It can’t be any clearer that President Obama and his socialist colleagues simply don’t get it. When they transfer money from the wealthy who produce the wealth to those who don’t, they just undermine the production of more wealth. Transferring money to the government, who produces nothing in terms of production output, reduces wealth. There are many ways to assist the poor, but socialistic government control is among the worst ways. We simply equalize our poverty, not increase wealth. All of the government entitlement programs, government spending on projects, and bailouts of poorly managed business is the exact opposite of how you stimulate an economy. They are wondering now why these programs fail. As things get worse, they keep trying to do the same thing. Somewhere along the line, they got philosophy confused with economics.
What we are seeing in Washington is not really about solving the debt problem. It is about power and control. It is about who has it and what direction they will take the nation. It is about whether we transfer power from the people to the elite in government.
In fairness, there are plenty of people in both parties that do not understand the fundamentals of economic systems, but the difference is one believes in more government and the other less. More government means less wealth. Less government at least provides the opportunity to grow it. Why then would the citizens of a country choose to become poor, while giving away their right to free choice? Americans better wake up to these realities soon or they will awaken to a new reality. They will find themselves working for a government that tells them they will enjoy sharing their poverty with their fellow man.
Sunday, July 24, 2011
Resolving the Government Stalemate
President Obama said on July 23rd, in a nationally televised town meeting, that the primary problem was that people were only listening to one side of the debate on solving the national debt problem and capping the debt. He said that if they only got their news from one source like Fox News, that they just don’t understand the problem and that it was causing entrenched positions. Essentially, he was blaming the news for the problem of a stalemate between him and Congress. Obviously, if people only listen to one source, they may have a biased view, but that is not the cause of the problem in Washington and his relationship with Republicans in Congress. The problem is much more basic than resolving differences in whether to increase taxes or not. The problem is that there are fundamental differences in belief between him and Conservatives about the role of the Federal Government. He believes the solution is government. Conservatives believe the problem is Government. Those beliefs are so radically opposed as to make it impossible to agree on much of anything.
It always strikes me as strange that any well educated person in the subjects of history, government, economics, finance, business, or political philosophy can in the year 2011 believe that governments can manage any nation’s economy, can deliver services more efficiently than the private sector, or can provide for the wants and needs of all of its people at a higher level than a capitalist system. I would just love to debate this publically with anyone that believes that government is better. You cannot find any examples, anywhere when that was true. The answers are so obvious that they cause me to wonder what our education system teaches these days. It isn’t about differences in philosophy. Those have been debated for hundreds, even thousands of years. Most of the issues debated today were addressed by Cicero more than 2000 years ago. Most of the major philosophies have been tried numerous times and Capitalism has always been the winner. Sovereign Republics as a form of government have been the most efficient and they are for some very simple reasons.
Don’t let people try to tell you that socialism and communism are different things. They are both part of Marxist Communism as defined by Karl Marx. Socialism is the governmental system for achieving a communistic economic state. It has been tried over and over and all end the same way in totalitarian states whose economies collapse from their own weight, resulting in social revolution. It is an evitable evolution toward collapse because no one has yet found a way to prevent it. Socialism, like the kings or emperors of prior times, requires complete control of all social activity. In order to do this, it requires an enormous bureaucracy to manage it. The growth of the bureaucracy is uncontrollable for reasons too numerous to discuss here, but because of the size, it requires larger and larger segments of the revenue of the nation to support it. Since governments produce nothing on their own, this revenue does not produce growth, but slowly strangles the output capacity of the non-government segment until there is simply not enough money to support it. Does that sound at all familiar?
The Soviet Union, Cuba, Venezuela, most of South America, and Eastern Europe, all experienced economic failures under these systems, yet they keep repeating the same mistake. Isn’t it insanity to make the same mistake over and over while expecting a different outcome? Why would sane people want to turn over their liberty and decisions to government bureaucrats whom we all know do little, complicate our lives, and generally make a mess of everything they are involved in? The problem here is not where we get our news. The problem is that politicians and the public have a fundamental difference about whether we want more government or less. It is whether we want government to take more control of our lives or less. It is whether we believe in our founding fathers belief in a free people or one in which government makes the decisions. It is whether we believe in free markets or government controlled markets who decide what and how much to produce. It is Socialism versus Republicanism. We won’t change those differences in view. We can only change the politicians and elect those who believe what we believe.
It always strikes me as strange that any well educated person in the subjects of history, government, economics, finance, business, or political philosophy can in the year 2011 believe that governments can manage any nation’s economy, can deliver services more efficiently than the private sector, or can provide for the wants and needs of all of its people at a higher level than a capitalist system. I would just love to debate this publically with anyone that believes that government is better. You cannot find any examples, anywhere when that was true. The answers are so obvious that they cause me to wonder what our education system teaches these days. It isn’t about differences in philosophy. Those have been debated for hundreds, even thousands of years. Most of the issues debated today were addressed by Cicero more than 2000 years ago. Most of the major philosophies have been tried numerous times and Capitalism has always been the winner. Sovereign Republics as a form of government have been the most efficient and they are for some very simple reasons.
Don’t let people try to tell you that socialism and communism are different things. They are both part of Marxist Communism as defined by Karl Marx. Socialism is the governmental system for achieving a communistic economic state. It has been tried over and over and all end the same way in totalitarian states whose economies collapse from their own weight, resulting in social revolution. It is an evitable evolution toward collapse because no one has yet found a way to prevent it. Socialism, like the kings or emperors of prior times, requires complete control of all social activity. In order to do this, it requires an enormous bureaucracy to manage it. The growth of the bureaucracy is uncontrollable for reasons too numerous to discuss here, but because of the size, it requires larger and larger segments of the revenue of the nation to support it. Since governments produce nothing on their own, this revenue does not produce growth, but slowly strangles the output capacity of the non-government segment until there is simply not enough money to support it. Does that sound at all familiar?
The Soviet Union, Cuba, Venezuela, most of South America, and Eastern Europe, all experienced economic failures under these systems, yet they keep repeating the same mistake. Isn’t it insanity to make the same mistake over and over while expecting a different outcome? Why would sane people want to turn over their liberty and decisions to government bureaucrats whom we all know do little, complicate our lives, and generally make a mess of everything they are involved in? The problem here is not where we get our news. The problem is that politicians and the public have a fundamental difference about whether we want more government or less. It is whether we want government to take more control of our lives or less. It is whether we believe in our founding fathers belief in a free people or one in which government makes the decisions. It is whether we believe in free markets or government controlled markets who decide what and how much to produce. It is Socialism versus Republicanism. We won’t change those differences in view. We can only change the politicians and elect those who believe what we believe.
Thursday, March 3, 2011
Oil Executives and Their Encore Problem
People have asked me why I think the oil company executives are acting in a way that seems contrary to America's national interests. If prices of fuel continue to climb, it will have a very negative effect on economic growth, job creation, and consumer purchasing power. I believe the answer is fairly simple and really has little to do with conspiracies or other potentially illegal acts. This is a more fundamental business problem that most CEOs of mega sized companies eventually face. It is called the Encore Problem. All publically owned businesses are measured by Wall Street analysts and investment companies on the growth of their business from quarter to quarter and year to year. Annual comparisons of revenue growth are often considered among the most important and one of the reasons people buy or sell a stock. For businesses, it is grow or die. If you are a company that already vacuums in several hundred billion dollars from the market, those year to year growth comparisons become a real problem. This is especially true in a commodity market like oil in which there is virtual market saturation of your product. There is only so much gasoline that the public can consume and the amount is very consistent from year. The only real growth factor in the consumption numbers is for population growth. The more people we have, the more we consume so that figure is basically tied to the growth of the population. When it comes to investing, people expect to see better growth than just keeping pace with the population growth. How then do these companies grow? They only have a couple of options. One is to raise prices and the other is to buy more market share. These huge oil giants are doing just that. They are certainly not going to compete on price and drive the revenue down. They are going to do everything they can to get the public willing to pay higher prices. Second, they are spending huge sums of money acquiring additional deposits of oil, natural gas, other competitors, and various other sources of energy to help prop up those revenue numbers. Those enormous expenditures also serve another purpose in that they disguise what might otherwise be obvious exaggerated profit earnings that would not be good for their own narrative. They are able to raise revenue, increase asset value, increase market share, marginalize excessive profits, and most favorably they increase stock prices and the value of their own stock options.
The resources available to these companies are staggering. Their budgets are greater than many countries. The money available to influence political opinion is greater than all the other industries. A million dollars to them is not even lunch money. They are not going to change without a considerable fight and unless the public begins to understand what is happening to them, these oil giants will simply buy up what they want and charge as much as they want. I don't ask anyone to accept these things based on my word for it. They should go out and verify it for themselves. Ask questions. Demand answers and if the answers don't quite fit, then you know there is more going on. It isn't usually what they say that is wrong; it is the part they omit.
What these companies know though is that public will do very little about it. Like most national problems, most people are too busy with their own lives to be bothered. They will whine and complain about it at home and among themselves, but they will simply accept it and say, "Well what can one person do? Nothing I can do." Obviously they can, but most won't. Unless you do, then we have no chance of stopping this price gouging at the pump and the further destruction to the economy. Pass this information on to someone. Make a difference. Have them read my other articles on this blog site. If people differ, then share those thoughts. We can all learn.
The resources available to these companies are staggering. Their budgets are greater than many countries. The money available to influence political opinion is greater than all the other industries. A million dollars to them is not even lunch money. They are not going to change without a considerable fight and unless the public begins to understand what is happening to them, these oil giants will simply buy up what they want and charge as much as they want. I don't ask anyone to accept these things based on my word for it. They should go out and verify it for themselves. Ask questions. Demand answers and if the answers don't quite fit, then you know there is more going on. It isn't usually what they say that is wrong; it is the part they omit.
What these companies know though is that public will do very little about it. Like most national problems, most people are too busy with their own lives to be bothered. They will whine and complain about it at home and among themselves, but they will simply accept it and say, "Well what can one person do? Nothing I can do." Obviously they can, but most won't. Unless you do, then we have no chance of stopping this price gouging at the pump and the further destruction to the economy. Pass this information on to someone. Make a difference. Have them read my other articles on this blog site. If people differ, then share those thoughts. We can all learn.
Thursday, February 24, 2011
A scam coming to a gas station near you?
Normally, when I am writing about scams I read on the internet, it is to warn people that the information they have been sent is either a hoax or some kind of scam to get information or money. This time I am warning people about one that I see that is all around us. It isn't exactly a scam though. It is more like cooperative pricing while taking advantage of the public's ignorance about how their industry works. They also do nothing to correct misinformation. I am speaking here about the major oil companies who dominate the gasoline and fuel markets. It is surprising to me that so many people in the media today simply take whatever information is fed to them and then repeat it over and over. Pretty soon the public believes it. What we hear from the media and many politicians is that we have world oil shortages, not enough supply for the US, and that is why we have rising gasoline prices. Nothing could be further from the truth. I don't want others simply to believe me. They should verify what I tell them, because all of it is publically available information from the government and the industry itself. It just isn't very well known.
We are told that we are dependent on Middle Eastern countries like Saudi Arabia for our oil and that all of our money is going to Islamic sheiks. Let's discuss this for moment. Where does our oil come from? More than half is produced right in the United States. Canada, Mexico, and Venezuela account for another 20% with the Caribbean and other South American countries making up most of the imports. Did you know that Saudi Arabia accounts for only about 5% and the entire Persian Gulf region is only 8.8%. Do you think that the United States refineries use all the oil that those companies produce here and import are for consumption in the US? The total amount of oil used by oil companies is about 18.7 million barrels per day. They import from Canada alone about 2.5 million barrels per day. They export to other countries about 2.5 million barrels a day of crude and refined oil products such as gasoline, liquefied gas, jet fuel, diesel, and so on. That means they export for the consumption of other countries about the same amount of refined product as they import from our largest oil trade partner. If these energy products were kept in the US, we wouldn't even need the Persian Gulf or Venezuela oil. Yet aren't you told we must drill more wells? Aren't we told we are shipping all of our money to the Arabs?
Who owns all this oil? Most is owned directly by 5 major oil companies who dominate the markets in the US and Western Europe. Most of the brands you see are all owned by these companies and those who aren't must often buy their gasoline from them. These same companies own many of their own wells, just like BP in the Gulf of Mexico and Exxon in Alaska. They simply pay extraction fees for oil pumped from leased proprieties. They drill, pump the oil, and refine. Most of these wells were drilled years ago, paid for, and fully depreciated. They aren't paying those enormous prices you see on TV for spot market oil. In fact the price you hear on TV isn't really even spot market prices, but are the price of the "front-month" oil futures contracts traded by investment companies and speculators. Those contracts have very little to do with any oil that these oil companies are using. It certainly isn't what oil companies are paying for oil. Those who do buy on the spot market are those who don't have their own. Oil companies might supplement their supplies on the spot market, but when you own your wells to feed your own refineries, you are paying very little per barrel.
So why are you and I paying so much at the pump? The answer is simple. Because they can charge it and you are willing to pay it. If all competitors charge the same prices, what choice do you have? It isn't as if every one of these companies has identical cost structures. They don't and all are different, but they learned decades ago that there is no advantage to any company to start a price war. They just cooperatively price so as not to drive prices down, but drive them up. All win that way, with no losers, and since most of the small guys have already been driven out, there is no need to scramble for market share. They just let the oil speculators on the financial exchanges play with the open spot market and that prepares the consuming public for the supply and demand argument. Most Americans are now well trained on that message.
The problem here is not conspiracy among businesses. They are simply maximizing profits for their investors as all business does. The problem here is that Congress has done nothing since the early 1900s to control monopoly formation. Oil companies have merged over and over and now form virtual oligopolies. Unless competition is reestablished, this will get even worse, driving up inflation to even higher levels. The answer may be to break up these companies as they did in the past to force competition back into this industry that is now draining the economy of enormous amounts of economic resource.
We are told that we are dependent on Middle Eastern countries like Saudi Arabia for our oil and that all of our money is going to Islamic sheiks. Let's discuss this for moment. Where does our oil come from? More than half is produced right in the United States. Canada, Mexico, and Venezuela account for another 20% with the Caribbean and other South American countries making up most of the imports. Did you know that Saudi Arabia accounts for only about 5% and the entire Persian Gulf region is only 8.8%. Do you think that the United States refineries use all the oil that those companies produce here and import are for consumption in the US? The total amount of oil used by oil companies is about 18.7 million barrels per day. They import from Canada alone about 2.5 million barrels per day. They export to other countries about 2.5 million barrels a day of crude and refined oil products such as gasoline, liquefied gas, jet fuel, diesel, and so on. That means they export for the consumption of other countries about the same amount of refined product as they import from our largest oil trade partner. If these energy products were kept in the US, we wouldn't even need the Persian Gulf or Venezuela oil. Yet aren't you told we must drill more wells? Aren't we told we are shipping all of our money to the Arabs?
Who owns all this oil? Most is owned directly by 5 major oil companies who dominate the markets in the US and Western Europe. Most of the brands you see are all owned by these companies and those who aren't must often buy their gasoline from them. These same companies own many of their own wells, just like BP in the Gulf of Mexico and Exxon in Alaska. They simply pay extraction fees for oil pumped from leased proprieties. They drill, pump the oil, and refine. Most of these wells were drilled years ago, paid for, and fully depreciated. They aren't paying those enormous prices you see on TV for spot market oil. In fact the price you hear on TV isn't really even spot market prices, but are the price of the "front-month" oil futures contracts traded by investment companies and speculators. Those contracts have very little to do with any oil that these oil companies are using. It certainly isn't what oil companies are paying for oil. Those who do buy on the spot market are those who don't have their own. Oil companies might supplement their supplies on the spot market, but when you own your wells to feed your own refineries, you are paying very little per barrel.
So why are you and I paying so much at the pump? The answer is simple. Because they can charge it and you are willing to pay it. If all competitors charge the same prices, what choice do you have? It isn't as if every one of these companies has identical cost structures. They don't and all are different, but they learned decades ago that there is no advantage to any company to start a price war. They just cooperatively price so as not to drive prices down, but drive them up. All win that way, with no losers, and since most of the small guys have already been driven out, there is no need to scramble for market share. They just let the oil speculators on the financial exchanges play with the open spot market and that prepares the consuming public for the supply and demand argument. Most Americans are now well trained on that message.
The problem here is not conspiracy among businesses. They are simply maximizing profits for their investors as all business does. The problem here is that Congress has done nothing since the early 1900s to control monopoly formation. Oil companies have merged over and over and now form virtual oligopolies. Unless competition is reestablished, this will get even worse, driving up inflation to even higher levels. The answer may be to break up these companies as they did in the past to force competition back into this industry that is now draining the economy of enormous amounts of economic resource.
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