OT - Gas I gasped!

[Dean May]

Wow, you're an economist and you understand the destructive policies of the
Fed! A rare combination. ;-) I presume you voted for Ron Paul? 

Speaking of the Fed and Bernanke, here is a hilarious video spoofing Dean
Hubbard of Columbia University who got passed over for the Fed chairmanship
http://www.youtube.com/watch?v=3u2qRXb4xCU

The student portraying Hubbard even looks something like him.


Dean

Dean May             cell 812.239.3359 

PianoRebuilders.com   812.235.5272 

Terre Haute IN  47802

 


-----Original Message-----
From: pianotech-bounces at ptg.org [mailto:pianotech-bounces at ptg.org] On Behalf
Of Steve Brooks
Sent: Wednesday, May 14, 2008 10:18 PM
To: pianotech at ptg.org
Subject: RE: OT - Gas I gasped!

I'm not about to step into the emotional electricity / fossil fuels 
debate but perhaps I can help with a couple of misconceptions about the 
current price of fuel.

If you correct for taxes and other government fees, gasoline sells for 
about the same price world wide. It comes as a surprise to many when I 
tell them that the price of gasoline is not actually rising in real 
terms by very much. Some of you may be old enough to remember the 
inflation of the mid seventies to the early eighties when the same 
phenomenon was evident.

What you are seeing is a reflection of the falling value of the dollar. 
It is caused by inflation. Inflation is an expansion of the money supply 
through debt by governments in partnership with central banks - not, as 
popularly believed, an increase in consumer prices per se. Increased 
consumer prices are an effect of inflation. You have seen this liquidity 
increase roll through a series of bubbles. First it boomed the stock 
market, then the housing market and now commodities. Energy is booming 
and food is next. Tip: if you are carnivorous, I would stock up on meat now.

The real increase in the price of fossil fuels is in the cost of 
extraction which is increasing (but gradually) and increased demand in 
developing nations. But these components pale compared to the effects of 
monetary inflation. If you take the price of a barrel of oil and divide 
it by the price of gold you will see that oil prices have remained 
nearly constant since 1945. Gold is the closest thing we have to a 
constant through history. We can use it to correct for monetary effects 
and doing so illustrates where the problem really lies. If the price of 
gas, housing, food and such is important to you please point the finger 
of blame accurately - at the deliberate policies of the Federal 
Government and Federal Reserve Bank. The dollar has decreased 95% in 
spurts since 1913 when the FED was created. This is just the latest 
wave. It is not the fault of greedy oil companies, middle Eastern 
cartels nor speculators; all of which will be blamed before the real 
culprit. It doesn't have to be this way. The Byzantine Empire managed to 
keep prices constant for nearly 800 years.

This is a vast simplification, though relatively simple to prove given 
enough time, and this is the wrong forum for detail. Still, I point it 
out as a public service wherever I encounter such discussion. You may be 
as confused by monetary policy as I am by some of the technical 
discussion on this forum. I am mostly an observer now, but spent nearly 
forty years as an economist - a fact I rarely mention at social gatherings.

Steve Brooks

--
"There is no subtler, no surer means of overturning the existing basis of
society than to debauch the currency. The process engages all the hidden
forces of economic law on the side of destruction, and does it in a manner
which not one man in a million can diagnose."  - John Maynard Keynes