bjdotson on August 04, 2010, 08:51:22 am
Sorry about the above. When I posted did not realize that there was 4 more pages of posts on this subject and that my point had already been made (and much better than I did)

Still learning how the forum works.


J Thomas on August 04, 2010, 09:28:34 am
The oil companies were not "hoarding oil" - they were prevented from selling it at market prices.

In terms of national military strategy that makes sense. A policy of "Burn America First" wouldn't be good if we later had to face a serious war. But that's pretty much irrelevant by this point. Now, if we have a serious economic downturn and we allowed free trade in oil we could find ourselves becoming net oil exporters because US oil companies would need hard currencies. And the US economy would have to make do on whatever part of the domestic oil we could afford.

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Japan never had gas lines; America did, and resorted to rationing - people could buy gas only on certain days, depending ( if I recall correctly ) on one's social security number. The difference is that America fixed prices, Japan let the prices rise.

Yes. Gasoline had turned into an economic necessity for most people, and at that point a free market would have been even more disruptive than rationing. If less-than-twice-minimum-wage people can't get to work regularly, it's a worse problem than those same people waiting in gas lines in their spare time. The last-digit-of-license thing was a sop to show they wanted to make the lines shorter.

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Carter ( like almost all politicians ) tried to blame the rising prices on greedy profiteers, hoarders, and so forth - anything but the real cause, which is the inflation of the money supply by the Federal Reserve and the banks.

The immediate cause was foreign policy. In a moment of inattention Kissinger gave King Saud and the Shah permission to control the oil market. Then unconditional US support for Israel in the 1973 war gave them the political conditions to make it work. When the Shah fell and Iran's oil exports went way down, OPEC increased production but not enough, so there was a 4% shortfall. This would have been felt primarily in europe and the third world, but Carter honored our obligations to european allies and let oil that had been intended for the USA be diverted to them. Kissinger's promise to supply Israel with all the oil it needed was just a little blip on that.

If the US government hadn't diverted oil, the US oil shortage would have been just from the spot market and smuggling. But Carter wanted to save europe more serious troubles, and maybe it cost him the election. The third world of course took it on the chin.

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As Milton Friedman determined through extensive research, "inflation is always and everywhere a monetary phenomenon. "

That's logically necessary. No matter what causes inflation, monetary policy can eliminate the inflation if you don't care about side effects. Government monetary policies can reduce demand until prices fall enough. And some people won't recognise it as government action, though a lot of voters will blame the government for whatever discomfort they feel, whether they think the government directly caused it or not.

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[Don't be giving Obama a free pass. He's not "keeping the boat on an even keel", he's doubling down on Bush's bad bets.

I guess my damnation was too subtle. It's somewhat better for a boat to sink evenly than capsize, but for people who depend on it not to sink, that's not nearly good enough.

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These two clowns will go down in history, along with Helicopter Ben Bernanke, as the people who blew gigantic trillion-dollar-sized holes in the boat. This is not heroism, but hubris.

Probably Greenspan will share a lot of the blame. He spent a long time doing things that could not work in the long run, which were short-term pleasant. The media said he was a genius because he figured out how to get such wonderful results. Then when he reached the end of the line and there was no wiggle-room left, he quit and left it to Bernanke to face the consequences.

Now it isn't hubris, it's desperation. They don't see any adequate solution so they do whatever they can to put off catastrophe.

Perhaps they can find some way to declare a WWII style world war, and maybe this time draft everybody and nationalize the whole nation's resources -- everything -- for the duration, and when it's time to pick up the pieces things will be so different that nobody can figure out who owes what from the old days.

Gillsing on August 04, 2010, 11:46:19 am
Sounds like a plan. And maybe we can finally have a world government too, so that such a terrible war can never happen again. The people will demand it.
I'm a slacker, hear me snore...

jamesd on August 04, 2010, 05:11:10 pm
In this particular case a lot of politicians believed that TARP had to be done quickly to prevent a disaster, and they couldn't wait for the media to persuade the public with incessant explanations why it had to be done. They risked their re-election to do what they could plausibly say was their fervent belief was the right thing. There was a minority of voters who  believed it had to be done to prevent a catastrophe.
Did they believe that, or did they believe that only the little people, people who are not well connected, should lose money and lose their jobs?

Consider, for example, the bailout of GM.  This was bailout of some creditors (the union) at the expense of other creditors, preserving some jobs (union jobs) and some car sellers, at the expense of other car sellers.  It was not stimulus, but primarily redistribution from the less connected to the more connected to preserve the wealth and jobs of the connected, at the expense of the wealth and jobs of the less connected.  Individual car resellers were punished or rewarded case by case, depending on each one's individual political connections and social class.

wdg3rd on August 04, 2010, 08:55:40 pm
The oil companies were not "hoarding oil" - they were prevented from selling it at market prices. Japan never had gas lines; America did, and resorted to rationing - people could buy gas only on certain days, depending ( if I recall correctly ) on one's social security number...

Actually, it was the last digit of your car's license plate. If the number was odd, you could only buy on odd days; even numbers on even days.

Which was a real pain in the butt if you had a vanity plate without numbers.
Ward Griffiths        wdg3rd@aol.com

Men will never be free until the last king is strangled with the entrails of the last priest.  --  Denis Diderot

wdg3rd on August 04, 2010, 09:07:37 pm
A point about smugglers underselling tobacco merchants. The only reason that this is economically viable, is that the tobacco merchants have to charge taxes which is close to 50% of the price of the product. Tobacco merchants selling at free market prices would not have this problem. Of course then the "smugglers" become rival merchants trying to get your business. Truly an example of the government being the problem, not the solution.

The taxes are considerably more than half the price of the product.  April Fool's Day last year the federal tax on a pound of cigarette tobacco went from less than a dollar (retail in Pennsylvania was $11-14 with that tax) to just under $25 per pound.  A bag of cigarette tobacco is now about $40 in Pennsylvania.  (Let's not talk about the price in New Jersey).  So since that tax hasn't been extended to pipe tobacco (yet), that's what I make my cigarettes from.  When that tax happens (there are bills in committee) I guess I'll have to grow my own.  (Oh yeah, I could quit smoking, which is the official reason for these taxes, but I won't give the assholes the pleasure).
Ward Griffiths        wdg3rd@aol.com

Men will never be free until the last king is strangled with the entrails of the last priest.  --  Denis Diderot

terry_freeman on August 04, 2010, 10:34:49 pm


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Japan never had gas lines; America did, and resorted to rationing - people could buy gas only on certain days, depending ( if I recall correctly ) on one's social security number. The difference is that America fixed prices, Japan let the prices rise.

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Yes. Gasoline had turned into an economic necessity for most people, and at that point a free market would have been even more disruptive than rationing. If less-than-twice-minimum-wage people can't get to work regularly, it's a worse problem than those same people waiting in gas lines in their spare time. The last-digit-of-license thing was a sop to show they wanted to make the lines shorter.

Why must you ignore everything which is known about economics? When prices rise, people make choices to reduce their usage. We have seen this in recent times, when gasoline prices went as high as $4 per gallon. People found ways to economize - travel a bit less, share rides, use a bicycle or scooter, buy a hybrid, etc. The government stats showed about 5% less gasoline usage as a result.

Fixing the prices at artificially low levels prevented these adaptations from happening. This is what caused the shortages. There are thousands of years of examples of this process in many countries; it cannot be wished away by politicians or by people who prefer to ignore the laws of economics.


J Thomas on August 05, 2010, 04:47:59 am

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Japan never had gas lines; America did, and resorted to rationing - people could buy gas only on certain days, depending ( if I recall correctly ) on one's social security number. The difference is that America fixed prices, Japan let the prices rise.

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Yes. Gasoline had turned into an economic necessity for most people, and at that point a free market would have been even more disruptive than rationing. If less-than-twice-minimum-wage people can't get to work regularly, it's a worse problem than those same people waiting in gas lines in their spare time. The last-digit-of-license thing was a sop to show they wanted to make the lines shorter.

Why must you ignore everything which is known about economics? When prices rise, people make choices to reduce their usage. We have seen this in recent times, when gasoline prices went as high as $4 per gallon. People found ways to economize - travel a bit less, share rides, use a bicycle or scooter, buy a hybrid, etc. The government stats showed about 5% less gasoline usage as a result.

I don't disagree with any of this. What you are ignoring is that when prices rise dramatically, poor people economize by doing without, and and somewhat-poor people economize by mostly doing without. Somebody has to use less -- it's them, the ones who can't afford it. Some don't use much less but do pay much higher prices.

If for some reason the government wants those poor people to have some of the limited-supply product, they can get that by rationing. That's hard to organize ideally, of course, and poor people who get more of the rationed product than they think they need can sell their excess on the black market.

The classic example of this is famine. Throughout history, when food supplies got tight the poorest people starved. And they started starving while there was still more than enough food, because there was more profit in supplying rich people with more than enough of luxuries that wasted food than there was in selling to the poor.

When governments got organized enough to do rationing, they reasoned that they could reduce the starvation that way and get more citizens past the temporary shortage. If everybody gets enough to survive, that's potentially a good thing even if it means that during the famine there are no fat pigs for the richest.

In practice that only works for mild famines. When there just plain isn't enough food and some people have to starve, then one way or another the poorest people will die regardless. Their ration cards get stolen, they get killed and their ration cards used, the ration system breaks down and most of the food goes to the black market, the government picks the people it considers least valuable to itself and denies them ration cards, there are lots of ways for it to fail.

During WWI and WWII many nations that had food shortages tried to do food rationing and most seemed to feel that it reduced starvation.

It works best as a short-term thing, to help poor people survive economic shocks when the economy is far from equilibrium. The longer it lasts the worse it breaks down.

It's hard to confirm how well it actually works. Would the bureaucrats who operate the ration system do more good if they were put into the fields with hoes to grow food? At equilibrium, yes. For a sudden shock, it's hard to measure accurately.

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Fixing the prices at artificially low levels prevented these adaptations from happening. This is what caused the shortages. There are thousands of years of examples of this process in many countries; it cannot be wished away by politicians or by people who prefer to ignore the laws of economics.

The oil shortage that Carter faced was caused by the revolution and various disruptions in Iran, followed by a lot of speculators hoping to make money fast. Sudden famines typically come from unusual bad weather. It's possible for a government to set things up so that there won't be enough food produced. In the most extreme case it could make farming illegal and kill anybody accused of farming. But when there is enough food 19 years out of 20 but this year there were heavy rains just before harvest and the grain rotted in the field, that might not have much to do with government.

And if you get a sudden shortage and wheat flour is $20/pound in December, that probably isn't going to get you a lot more wheat next season than if the price was only $5/pound. A temporary shortage followed by temporary rationing will probably not do that much to discourage farmers from farming.

You certainly have a point. I read that during WWII Nixon was a clerk in the price control office and he went through a time when no meat was shipped from Chicago to the east coast because the meat packers could not make a profit at the price they were allowed to sell. Maybe the war had gone on too long, and the government control was not flexible enough. Later Nixon phased in price controls and then phased them out again. I think maybe he wanted to show the public that he was trying to do something, and he couldn't think of anything else that would have such a visible effect.

There may be a better voluntary way to reduce the effect of big sudden shocks on poor people. If you can make a good argument for it, I expect a lot of governments would be interested. They get headaches from rationing that they'd likely rather avoid.

quadibloc on August 05, 2010, 08:26:55 am
When prices rise, people make choices to reduce their usage.
This is true. However, if gasoline prices rise high enough that most people can't get to work, in cities where public transit has been designed around the assumption that almost everyone has a car... it isn't possible to commute from the suburbs on a bicycle.

The oil companies were not "hoarding oil" - they were prevented from selling it at market prices.
They were hoarding oil: they were failing to continue to produce and sell oil at full capacity at the price they were told they were allowed to sell it at.

Of course this involves a lack of respect for the property rights of the oil companies.

Essentially, the conduct most Americans expected of their government was to give maximum priority to keeping America's factories working at full capacity. So that they would be there to turn out tanks and airplanes to keep Russia at bay.

As the non-communist OPEC nations had treasonously acted in such a way to compromise American industrial capacity because of their petty quarrel with Israel, many Americans are probably surprised to this day why America didn't take all their remaining oil away as soon as the Cold War ended.

J Thomas on August 05, 2010, 09:38:33 am
When prices rise, people make choices to reduce their usage.
This is true. However, if gasoline prices rise high enough that most people can't get to work, in cities where public transit has been designed around the assumption that almost everyone has a car... it isn't possible to commute from the suburbs on a bicycle.

Consider that the original oil shock from iran only reduced supply by 4%, after OPEC increased production to offset the problem somewhat. If the prices had come because of consumer demand, and everybody had chosen to reduce their oil use by a mere 4%, then the problem would have been solved. But somehow the structure of the market was set up so that prices rose very high. And that happened before the US government got the idea they had to do something and stepped in with their dubious plans.

Someone recently explained that speculators help to ameliorate this sort of thing. They buy while prices are still going up, and then sell when prices are higher, and this keeps prices from rising as high as they would have otherwise. Just imagine how bad that oil shock would have been without the speculators!

How could the oil companies sell so much oil at extremely high prices, almost as much as they sold at low prices? It appears that people did not reduce their consumption all that much, that's one thing. And also, since there was a little less oil to go around, and people desperately wanted it, on the international market the prices got bid up until third world nations just couldn't pay. We got high prices, they got great big shortages. Nobody had much pity on them, everybody else was busy looking out for themselves. Except the Saudis. The Saudis could have given them oil, or sold it to them at a low price out of charity. Instead the Saudis took some Saudi profits and gave it to their preferred third world nations to bid up prices and get some oil at the high prices.

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The oil companies were not "hoarding oil" - they were prevented from selling it at market prices.
They were hoarding oil: they were failing to continue to produce and sell oil at full capacity at the price they were told they were allowed to sell it at.

Of course this involves a lack of respect for the property rights of the oil companies.

Yes, if we suppose that oil companies should have total control of the oil that only they own, and they should do whatever they choose with it looking after their own self-interest, then nobody else has any right to tell them how to run their businesses. But that didn't seem completely practical under the circumstances.

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Essentially, the conduct most Americans expected of their government was to give maximum priority to keeping America's factories working at full capacity. So that they would be there to turn out tanks and airplanes to keep Russia at bay.

That idea was starting to look questionable. We had gone to a lot of trouble to stop the USSR if they chose to invade western europe. We had troops there, and a whole lot of equipment prepositioned with the idea we'd fly more troops over at short notice. Lots of money involved. Then in 1973 Israel got in trouble and we shipped them a whole lot of that equipment, including a whole lot of the tanks we were depending on to defend western europe. Russia did not invade. Russia asked europe for trade deals. We said, "You can't do important trade with the USSR! You'll be propping them up, and when you get dependent on their exports they can control you!" The europeans didn't believe us. Because when it was a choice between defending NATO and defending Israel we chose Israel, and nothing happened to europe after all. Americans also started to argue abou just how dangerous Russia was. That argument continued within the CIA until a few weeks after the USSR collapsed.

A whole lot of americans wanted to keep the businesses running at full capacity so they would not be unemployed.

J Thomas on August 05, 2010, 09:59:27 am
The oil companies were not "hoarding oil" - they were prevented from selling it at market prices.
They were hoarding oil: they were failing to continue to produce and sell oil at full capacity at the price they were told they were allowed to sell it at.

....,

As the non-communist OPEC nations had treasonously acted in such a way to compromise American industrial capacity because of their petty quarrel with Israel, many Americans are probably surprised to this day why America didn't take all their remaining oil away as soon as the Cold War ended.

That brings up an interesting moral question. I don't want to claim that anybody actually lets moral issues affect their behavior except me, so it's kind of an academic question, but still.

Would it be right to take away the oil from foreigners who refused to sell for a low price when we wanted them to?

Would it be right to take away the oil from US oil companies who refused to sell for a low price when we wanted them to?

quadibloc on August 05, 2010, 10:33:58 am
Would it be right to take away the oil from foreigners who refused to sell for a low price when we wanted them to?
But those foreigners actually stole the oil from the British and French oil companies it belonged to back in October 1973. The United States went to war against Latin American countries that stole mineral resources owned by American companies under similar circumstances.  :)

I see Russia invading Georgia, and China oppressing Tibet, and thus I regret the terrible lost opportunity after the fall of the Soviet Union - to carry out a pre-emptive nuclear strike against China and then effect regime change there, followed by agreeing to provide massive aid to Russia during its economic turmoil in return for its permanent demilitarization. Russia and India wouldn't need nuclear arms to defend against China, Pakistan wouldn't need nuclear arms to defend against India, and so the only nuclear weapons in the world would be in the hands of the United States, Britain, France, and possibly Israel.

And the world would be peaceful and happy, forever and ever, because none of the bad nasty people who might start a war or even lock up political prisoners would have the ability to disobey or defy the world's peaceful democratic nations in any way.

J Thomas on August 05, 2010, 12:18:35 pm
Would it be right to take away the oil from foreigners who refused to sell for a low price when we wanted them to?
But those foreigners actually stole the oil from the British and French oil companies it belonged to back in October 1973.

And it belonged to those companies because the colonial governments said it did? If conquest is an OK moral source for ownership, then if the local people can throw out the invaders then at that point they own it. And if you can take their country away from them, why give the oil to british and french oil companies? It's yours now.

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The United States went to war against Latin American countries that stole mineral resources owned by American companies under similar circumstances.  :)

Well, sure. If they aren't strong enough to hold onto it when we want it, why let them keep it? Somebody else will take it from them if we don't.

But shouldn't that apply to US oil companies too? If the US government wants them to sell at a loss and they don't, why should they get to keep the oil?

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I see Russia invading Georgia, and China oppressing Tibet, and thus I regret the terrible lost opportunity after the fall of the Soviet Union - to carry out a pre-emptive nuclear strike against China and then effect regime change there, followed by agreeing to provide massive aid to Russia during its economic turmoil in return for its permanent demilitarization. Russia and India wouldn't need nuclear arms to defend against China, Pakistan wouldn't need nuclear arms to defend against India, and so the only nuclear weapons in the world would be in the hands of the United States, Britain, France, and possibly Israel.

Definitely Israel. Israel already had nukes, and they'd manipulate us into a nuclear war with somebody else before they'd let us take their nukes from them. The USA is Israel's ally but Israel is not the USA's ally.

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And the world would be peaceful and happy, forever and ever, because none of the bad nasty people who might start a war or even lock up political prisoners would have the ability to disobey or defy the world's peaceful democratic nations in any way.

Sometimes I get a little satirical, but I can't hope to ever catch up with you.

quadibloc on August 05, 2010, 04:36:24 pm
Sometimes I get a little satirical, but I can't hope to ever catch up with you.
Yes, I was laying it on a bit thick.

Obviously, a pre-emptive strike on China is starting a war, which is one of the reasons it didn't happen. But the invasion of Georgia showed, dramatically, that the hopes that many had when the Soviet Union fell are unlikely to be realized. Instead, powerful, hostile, and unfree nations will continue to create problems for the world's relatively free nations.

To me, the cause of the diversion of so much productive labor into weapons of war isn't the fault of our power-hungry politicians so much as the real foreign enemies that we actually do have to defend ourselves against. Russia and China have both been getting a lot stronger since 1990 or thereabouts, and that's the thing that has me the most concerned.

 

anything