http://www.hawaiireporter.com/story.aspx...
"Oil prices are on the minds of many Americans as gas hits $4 a gallon, and continues to surge. How high can prices go? How can we solve these problems? What, or who, is to blame?
Part of the answer lies in understanding bubbles and monetary inflation, but especially the Federal Reserve System. The Federal Reserve is charged with controlling inflation through interest rate manipulation, however, many fail to realize that creating money, and therefore inflation, is really its only tool. When the Federal Reserve inflates the dollar as drastically as it has in the past few decades, the first users of the newly created money go in search of investments for their dollars. They must invest this money quickly and aggressively before it loses value.
This causes certain sectors to expand beyond what would naturally occur in the free market. Eventually the sector overheats and the bubble bursts. Overinvestment in dotcoms eventually led to a collapse of the NASDAQ.
Next we had the housing bubble, and now we are seeing the price of oil being bid up in the creation of another new bubble. Investors are now looking to commodities like oil, for stability and growth as they pull capital out of real estate. This increased demand for investment vehicles related to oil contributes to driving up the price of the actual product.
If the Fed continues with its bubble blowing policies of the past, the new commodities bubble will continue to grow, gas prices will continue to go up, as the value of your dollars go down. We will see an overinvestment in these commodities as solutions are desperately sought for a supply shortage, which is only part of the problem. Make no mistake, though, this is not the free market at work. Government manipulations have added levels of complication and unintended consequences to the marketplace.
This is not the time for members of Congress to take political potshots at each other, or to imagine that the free market is somehow to blame. This is the time to understand and fix problems. That begins with making sure the decision makers have a firm grasp on the causes of the problems and possible effects of their decisions. This is absolutely crucial if we want to get it right this time. That is why I am in the process of calling for hearings on Capitol Hill on how the falling value of the dollar affects energy prices.
Governments need to get out of the way and let the people get back to work so that we can get our economy back on stable footing. Our destructive regulatory environment, confiscatory tax policies, and managed, rather than free trade have chased many businesses overseas.
The bottom line is average Americans are being seriously hurt by these flawed policies, and they are not getting good information about the true dynamics at work. The important thing now is to get the diagnosis absolutely correct so we can administer the appropriate treatment and move on to a healthier economic future. To do this it is absolutely necessary to address the subjects of central banking and fiat money. By the way, a Presidential candidate wrote that. Guess which one? Much of the the price of oil is likely due to overbidding just as in the tech-bubble. To that extent, it should never have happened and wouldn't have, had markets been left to their own rational functions. Fed intervention, in other words, is almost certainly responsible for at least a chunk of it.
That said, I (unlike Frankenstein, above) am not quite so giddy about being 'ungreen', given that the best times of my life were spent on my grandparents' farms, in the Rocky Mountains and at camp.
There's a silver lining to almost everything. At the periphery of this debacle, I see countless thriving industries producing fuel at ever cheaper prices, and with the same 'runoff' as our great-grand-parents produced. In some cases, less.
When Henry Ford acquired financing to unleash the moving assembly line and millions of Model T's a year, guess what: There were, for most people in most towns, NO gas stations.
Investors and Ford himself were undeterred. How could they be so confident about selling a product that required fuel to operate KNOWING that there was no nationwide, regular supply of that fuel?
Well, there was.
But it wasn't gasoline.
Very few cars, early on, ran ONLY on gasoline. Most "T"'s had a switch that'd permit them to burn alcohol.
Ford envisioned a market-network where farmers profited by selling fuel made from waste...in whiskey stills, etc, building substantial local businesses which, in turn, purchased more and spent more leading to even MORE people buying "T's".
Did you know that as the internal combustion engine was being developed, gasoline was a useless waste product. Oil refineries hated gasoline because it stunk and there was no real market for it. They secretly dumped it into local tributaries, waterways and down dry wells to get rid of the stuff!
But John D. Rockefeller Jr. changed all that. He began marketing gasoline as a fuel for all these cars. But he faced competition from the growing alcohol industry.
Fortunately for him, there was a growing base of people who believed ALL alcohol to be absolutely evil and that the nation should outlaw it completely. The Temperance Movement had been around since the 1830's. By the late 1890's/early 1900's it was a substantial force.
Rockefeller supported an off-shoot movement - the Anti-Saloon League - with (by some accounts) donations totaling $4,000,000.
Money talks.
At midnight on January 16th, 1920, the Eighteenth Amendment was ratified.
At exactly the time automobile ownership was increasing sharply, the best of all fuels had been outlawed. Too bad, Mr. Farmer.
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IMHO, any manipulation of the free market represents the removal of rational thought from decisions that most desperately need that rational thought.
I suspect this intervention in the fuel industry (which granted a near monopoly to Rockefeller while snatching thousands of small but hard-won victories from farmer/fuel-makers; outlawing their bustling interaction in a fledgling fuel industry) contributed more than we may know to the crash of 1929.
Granted, flippant 'guidance' by the Fed would've eventually led to the crash. But just imagine how different the lives of that generation might have been had the crash been just a little softer, if fuel-makers had managed to keep their businesses running - their farms in the family - and if the entire market for fuel hadn't ended up, almost instantly, in the hands of a very few.
We've learned from our injustices and misguidances in this country. Odd that I'd never heard of THIS one until a month or so ago.
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Frankenstein's answer leaves me feeling very concerned for his well-being. "To stop using oil is exactly what the oil companies want."
Uh.... okay. After reading all the garbage about "Federal Reserve" and "Fiat Money" I can only guess that either Ron Paul wrote this, or one of his delusional brainwashed fans.
Why can't you people just die already???
Edit: Quoting Ron Paul disqualified your question from any serious consideration or substantive input from me. I will save my pearls of wisdom rather than cast them before swine, thanks. Many analysts are saying that. The weak dollar, supply uncertainties, heavy demand, and unrest in global markets, are contributing factors. Ron Paul wrote this.
Americans are pawns in the hands of commodities traders. No one reads posts this long. Get over yourself.
And yes what goes up must come down... tech stocks, housing and even oil This post is to long and noone will read past the second paragraph! I believe we are from what I have read. Maybe Ron Paul needs to meet John McCain... I'd guess Ron Paul. There's something missing in your analysis:
The dotcom bubble burst because the internet was not the new marketplace of the future, as was originally perceived. All of those companies that were formed to take on this new market failed and collapsed, all that investment was lost, and it was quite frankly a big waste of time and money.
The housing bubble burst because of shoddy policy, resulting in houses losing value, making less people want to buy them. The housing market failed. Better policy could have prevented this, and in fact Alan Greenspan worked on controlling this for over a decade.
Bubbles are going to happen, they are a natural part of an economy. Good policy can minimize their impacts and discourage their arrival, but they can't always be prevented.
The only way I see outright catastrophe in the oil industry is if production stopped. Even if price rises, consumption will lower, and this will eventually balance. The oil prices are completely artificial, they have nothing to do with the conflict/war or the environment or a shortage.
Oil reserves are at there highest. People need to wake up and see what is happening. Governments subsidize the **** out of the oil companies. This is just a trick in order to manipulate populations to go green along with there other lie of man-made global warming. To stop using oil is exactly what the oil companies want. Also read this. Speculators are driving up prices. They are trading on unregulated exchanges. Congress knows this and will not do anything to completely stop this.
http://www.atimes.com/atimes/Global_Econ...
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Speculators knock OPEC off oil-price perch
By F William Engdahl
The price of crude oil today is not made according to any traditional relation of supply to demand. It is controlled by an elaborate financial market system as well as by the four major Anglo-American oil companies. As much as 60% of today's crude oil price is pure speculation driven by large trader banks and hedge funds. It has nothing to do with the convenient myths of Peak Oil. It has to do with control of oil and its price.
**** Also read the senate's own report on the issue****
http://64.233.169.104/search?q=cache:JmD... I was going to argue with you on this stating what we are seeing is the crash of the "Dollar" bubble, but what I heard is a common complaint. WHere to put our money to stay ahead of inflation. THey can't put it in the bank because of the non existing interest, so they pit it in stocks when it crash they moved it all around. Investors love bubbles. They trick the common man to buy these things and stay ahead of them. They buy early causing it to go up. People see it rise and start buying, and then the investor sells before it crashes back. THe government is aiding this cycle and I roll my eyes everytime they say how much money they lost in the stock market. YOU can't gain or lose money in stocks until you sell. We need to go back to a higher interest rate and encoursge people to save again. Alan Greenspan even agree the biggest problem in modern times is the poor saving rates of the Average Americans. |
