TEXAS TEA

The rise in the price of gasoline over the last month has gotten some people a bit edgy. Since there is no real reason for the abrupt rise, other than unwise policies directly under the control of politicians, the point of "leveling off" may be equally irrational. One thing seems certain: The speculators in oil commodities are "back in the saddle again."


In the last go round speculators were credited with 70% of the price of a barrel of oil. When a barrel of oil was trading at $140/barrel, it real price should have been closer to $50/barrel. The apologists for speculators in the "market" claim that they provide a valuable service. Their risk-taking creates buffering in the rise and fall of commodities. However, though textbooks may be crammed with examples of speculations that improve the marketplace, the practical matter is that speculators are looking to "make a killing." They are interested in making lots of money.


This being the case the natural force operating on Wall Street is the creation of a monopoly, at least short term. All the speculators have a common interest in driving the price of a commodity, such as oil, higher. When they act in a union of purpose, the price does tend to rise. This movement gets the attention of others, who "join in the fun." The result is that the upward movement intensifies. At some point the continuing rise in the price of the commodity takes on the character of a "bubble." By this time the original speculators have sold out at great profits and are poised to sell the same commodity "short," betting on a sharp decline. Indeed, they typically mean to force the price down. Once it starts down, others join the short-selling and a precipitous drop may soon follow. Inside information that Washington, D.C., was about to make a move to freeze or drive down the price may hasten the sudden turn downward of this "high-flying" commodity.


However this common event unfolds at a given point in time in any of the commodity markets, its essential character is elitist, "clubbish" and self-serving. It does not function to improve the general welfare. Ordinary people are "johns" and "suckers" to this greedy crowd.


In point of fact a nation's commodities are too important to the general good of the citizenry to be left in the hands of self-serving people. The defenders of the latter dredge up "Adam Smith" and "invisible hand" to fend off any effort to alter Wall Street's "sweet science" of knocking out the people. I view their argument for what it is: A con.


In the days of pharaoh under the wise advice of Joseph, the abundance of Egypt was stored as a precaution against the evil day of famine. In short the Egyptian government took precautions to keep level the economy, whether times be abundant or lean. In America during its prime the Bible was reverred. Its wisdom was understood. When I was a boy, vast amounts of American commodities, gathered from the nation's rich soil, were stored in vast facilities erected for that purpose. In those times Americans thought of themselves as citizens of a nation, as opposed to "members of a global community." A certain pleasure was taken in our nation's being self-sufficient.


My belief is that commodity markets should be dismantled and that all commodites should be handled directly by the government. If mere speculators can be credited as useful in making a market, then the government can be great at it, as the government has an interest in the general welfare, whereas the speculators's interests end at the outside of the doors to their tri-plex abodes. In my view it would be better for companies or individuals to buy commodities from the government for reselling or to make a product, then to go to New York or Chicago to "bid" on the same commodities. The government can mark-up a commodity a modest amount to cover its costs of storing that same commodity. In fact the amount of mark-up can be set by legislation.


The key is for the commodites to be available to the nation's citizens at a reasonable, predictable basis. If there is ever a need for rationing a commodity, all would feel the same "tightening of the belt." The issue isn't equalitarianism but the general welfare, which the government is Constitutionally obliged to serve and protect. When a $50 barrel of oil is driven by speculators to the $140 level, then the national government is not doing its job well. Those in positions of power in any government should first serve the general welfare. If they cannot or will not do so, then they should not be allowed to exercise any power in the nation at all. The rich have proven to be a "cross" that the people should no longer be forced to bear. They have made the Promised Land of none effect with their greedy imperatives.


Driving up the price of a barrel of oil should be a crime punishable by jail time and a painful fine. Let's stop the nonsense.






May 28, 2009.