From: crb7q@kelvin.seas.Virginia.EDU (Cameron Randale Bass)
Subject: Re: Running out of oil  -
Organization: University of Virginia
Distribution: na
Date: Wed, 16 Sep 1992 03:07:23 GMT

In article <30643@goofy.Apple.COM> ems@Apple.COM (Mike Smith) writes:
>In article <2855.1460.uupcb@spacebbs.com> howard.smith@spacebbs.com (Howard Smith) writes:
>>GC>You have this backward I think. In the past thirty years we've seen a
>>GC>barrel of oil go from $2 to the current $18 with a short period around
>>GC>$30 engineered by OPEC. The reality was that OPEC couldn't hold the
>>GC>line at $30 no matter how hard they tried, somebody always decided to
>>GC>cheat and turn a fast buck. Supply and demand really did break OPEC's
>>GC>stranglehold on world oil prices. Current price is slightly lower than
>>GC>the price 30 years ago when inflation is factored in.
>>
>>Don't we have a "chicken vrs. the egg" situation here. I'm under the
>>impression that a large chunk of inflation is due to rising energy
>>prices; so if our economy is based on an increasingly scarce form of
>>energy, we can expect inflation to increase proportionally. Thus the
>>price of the energy would not seem to rise, when adjusted for inflation.
>
>The reason for inflation is that we print more money.  That is all.
>You increase the money supply, you get inflation.  IFF the rate of
>increase in money supply matches the real increase in productivity
>are you 'in balance'.  (i.e. money supply growth of about 1.5%).

      This is a rather extreme monitarist viewpoint. See below.

>WHY do we print more money than that?  Because excess money, leading
>to inflation, is a tax on holding dollars.  A tax that noone has to 
>vote for in congress.  Who pays this tax?  Folks holding dollar
>denominated assets.  Who is that?  Pension funds, OIL COUNTRIES,
>JAPAN, bond holders, Banks and S&Ls, drug runners with large cash 
>holdings, and to a small extent John Q. Public.  Who benefits?  
>Folks holding land (like homeowners who's mortgage is denominated in $$$),
>or otherwise oweing $$$ denominated debt like bond issuers.  Who are
>the bond issuers?  Why Corporations and Governments.
>
>Get the picture?  With NO VOTE BY ANYONE and NOONE TO BLAME, you can
>plunder the folks who have loaned out money; to the benefit of the
>government and corporate contributors.  And since the Banks and S&Ls
>are insured, the public will bail them out when the piper has to be paid...

     To the benefit of everybody large and small.  We gave ourselves
     large handouts which must now be paid back at government (i.e. our) 
     expense.   One of the first rules of insurance must be that the rates
     reflect the risks (i.e. you get much smaller return on investment     
     for much smaller risks).  With big-daddy Uncle Sam insuring 
     all S&L's 'with the full faith of the US Treasury', there was
     no need for any of the investors to reflect upon the risks, since
     there were none.  There was also no inherent need for any of the
     Savings institutions to similarly reflect since the only pressure
     from the fully-insured depositors was for higher rates (and hence
     riskier loans).  The mistake was in decreasing risk control while
     retaining full insurance at the old rates.  As far as corporations
     go, it probably hurt them by raising lending rates artificially.

>The snag?  After a few years the 'marks' catch on and you have to 
>have a period of 'recession' to clear the decks for the next round 
>of inflation.  That is what is happening now.  The oil Shieks and
>retirees are being coaxed back into dollar denominated assests, the
>banks and S&Ls are being liquidated and the public soaked to pay for
>it, the pension funds are being given enough of a breather to not look
>TOO insolvent and to get back into long term bonds. Etc.
>
>Look for another high inflation cycle in about, oh, 3-5 years time
>when the 'marks' are ready to be fleeced again.  Someone has to make
>the national debt go away, and taxing the holders of bonds seems to
>be the easiest way ... noone even has to vote for the tax ...
>
>So the oil countries give a convenient excuse for the process to be
>started.  So the massive price hikes by OPEC convince the govt to 
>give them a pile of dollars, then inflate them away before someone
>catches on.  So what?  Even with massive price hikes for oil, one
>need not have inflation if one doesn't print more money.  (vis.
>the Swiss and German experiences).  One then has to actually PAY
>for the oil, though ... while inflating the debt away is SOOO much
>easier to do...  

    At a certain point this argument fails.  Imagine a dollar fixed
    to a fixed gold supply so that you can have no monetary growth
    whatsoever.  Imagine OPEC somehow is able to raise the price of oil 
    to $4000 a barrel.  I suspect that you would see substantial inflation
    immediately prior to the economy collapsing completely (or alternatively
    using barter as the sole means of economic transactions which
    imposes its own penalties). 

>Econ is easier than any Engineering classes I've taken, you just have
>to know how to look for who's bread is being buttered in the 
>presentations...  If you expect Econ to come right out and say:  Here
>is how the world works!  You will find it confusing.  If you expect it
>to say:  Here are some interesting tools and observations presented
>in such a way as to mislead the masses from understanding what the 
>power elite is up to, yet be relatively clear to those from that social
>structure who really need to know how to use those tools to control
>the masses.  You will find it an excellent excercise in discovery.

    Oh.  Economics is the study of understanding 'what the power elite
    is up to'?  I must have missed that.

>If this all sounds cynical, well, it is.  There are some wonderful
>Economists who represent the average Joe.  (Heck, there are even
>a bunch of radical Marxist Economists).  The problem is one of number
>and position.  Who do economists work for?  Who decides what gets
>published?  Who controls the ability of those economists to gain
>grants and funding?  So they work and publish, but always with the
>understanding that they have to be careful not to offend the Patrons...
>Government and Business.

     Is economics an advocacy profession?  

     Also, what is 'government' in this context?  Heck, Senators of both
     political parties seem to make a good living leaking classified
     documents that have the potential of being very detrimental to 
     our national security.  I have a hard time with the contention
     that 'government' is a monolithic bloc that 'controls' the voices
     of economists.  As for 'business', that's a laugh.

>Due to this, you get Economics taking a very dispassionate position
>much of the time, careful to only describe the organs of control of the 
>economy in abstruse and technical ways; prefering to leave the 
>interpretation of that control to the Political Economy classes
>(for the 'Why it is good' spin) and the Sociology classes (for the
>'Why it is evil' spin).   (Though most of the Econ texts seem to like 
>to get in a bit of snide sniping when they think they can ...)
>
>Sometimes you even get the token 'radical left' class, text, or presenter;
>but the bottom line for Government doesn't change.  Never let the 'mark' 
>know they have been had...  leave 'em laughing or baffle 'em with BullShit,
>but don't let on that they have been purposfully had.

     'Government' is not clever enough or organized enough to 
     perform these acts on purpose.

     As far as the 'radical left' goes, we certainly have not been deprived 
     of their point of view.  However, if you wish to make Economics
     entirely point-of-view dependent then you will lose whatever
     utility it may have.

                             dale bass

-- 
C. R. Bass                                           crb7q@virginia.edu
Department of Mechanical and Aerospace Engineering
University of Virginia
Charlottesville, Virginia                            (804) 924-7926
Newsgroups: sci.energy