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Economic Ignorance May 8, 2008

Posted by cdquarles in Economics, Politics.
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This post is courtesy Rush Limbaugh.

Rush had some whining callers today discussing oil and oil product prices. As usual Rush got it almost 100% right. Rush slightly misquoted the EIA Weekly Supply Estimates report. Current US domestic oil production is averaging 5 million bbl per day, down from its peak of 8.9 million bbl per day. If you add in the oil equivalent natural gas production, then production has fallen from 10-11 million bbl per day to 7-8 million bbl per day (IOW gas production has increased less than oil production has fallen). Nevertheless, the US is the 3rd or 4th largest producer of oil in the world and exports about 1 million bbl of oil and oil derived products per day.

The callers were whining about ‘speculators’ and their (implied) nefarious role in current prices. Here is an indisputable fact of economic life. We are all speculators as long as there is a market for economic goods and services. Here is another indisputable fact of economic life. The most scarce commodity of all is human life energy. And this one, sad to say seems to have been forgotten, money is human life energy made visible and tangible; therefore, a medium of exchange between free men trading value for value. Money is not a store of value nor a unit of account. Those things can be expressed in terms of the exchange unit, but they are not of themselves exchange units.

Now back to speculators. The “speculators” that have been maligned for over 100 years provide a valuable service. A speculator buys when you want to sell, and a speculator sells when you want to buy. Because no economic good or service has a value other than the one a buyer places upon it at the time and place a buying decision is made, there is no such thing as overpaid, overvalued, underpaid, or undervalued. What someone thinks something ought to be valued at only applies to the person making the statement, and it has the same value that any other advice has when given ‘freely’ (namely zero). Because ‘speculators’ are subject to the same irrational fears or exuberance the rest of us are subject to, overreactions happen; but the speculators help ensure supply and demand are met at agreeable prices with less volatility than there otherwise would be (because they supply added information and liquidity to the markets).

* Labor is worth exactly what the seller agrees to be paid by the buyer.

* Money is worth exactly what holders think its value is.

* Inflation is the alteration of the supply of and/or the demand for money such that its purchasing power falls and deflation is the converse.

* Equality under G-d and before the law is the only kind of equality there is. Statutes that do not embody this truth are unjust prima facie. Graduated “progressive” income taxes are unjust. They harm the “poor” by depriving them of the dignity of free citizens that are taxed in their place; and they harm the “rich” by depriving them of the dignity of their persons via theft of their property. A fair tax is borne by everyone, by levying the same amount or the same rate.

* Just laws do not harm individuals or sets of individuals.

* There is justice, there is injustice, but there is no such thing as social justice.

* There is no such thing as a free lunch.

* You have a right to your own life, liberty, and property. You do not have a right to any part of another man’s life, to restrict his liberty, or deprive him of his property. Government cannot justly deprive a man of his life, liberty, or his property without showing just cause determined by just procedure (due process).

* You do not have the right to a job, an income, nor a right to any goods, services, or property owned by or supplied by another man. You must earn your living through honest dealings with your fellow man in service to your fellow man’s honest and just needs, wants, and desires; who must in turn justly serve you by honest dealing and agreed upon compensation.

* Socialism is slavery, class warfare is jealousy, envy, and covetousness. Both are tools of Satan that must be opposed by every good and just man, Christian or not.

* Compassion is the personal sharing of and relief of the suffering of your fellow man. Compassion is not stealing from Peter to give Paul a handout; and it most certainly is not government “welfare” programs. Christ did not exhort His disciples to petition the authorities or become authorities to compel one set of people to part with their life energy to give to other people so that they would be grateful and bestow upon the authorities the power of life and death. Christ petitioned His disciples to give of themselves a part of their life energy for the relief of the suffering of others.

* Monopolies are not made by being so named by governments, but by overt creative acts by governments (Microsoft, for instance, is not nor has it ever been a monopoly).

* Corporations do not have the power of compulsion. Governments do, however, so I remain amazed that people fear corporations but do not fear an overbearing government.

* You cannot help a “poor” man by harming a “rich” one.


— No sadder words of tongue or pen, are the words, “Might have been.” Anonymous