Friday, June 13, 2008

O'Reilly and Hannity and Colmes Drop the Ball on Oil Speculation

Dick Morris was on Hannity and Colmes tonight to discuss oil speculators' influence on oil prices. Last night, O'Reilly claimed that high oil prices are due to "greedy speculators" This is spin. If speculators are causing high oil prices, then the mechanism needs to be clarified.

For a subject this important, Hannity and Colmes and O'Reilly should have economists from the CATO institute and perhaps the Brookings Institution debate regulation of commodities speculation. Part of the discussion would explain what makes this situation different from the rest of the 300-year history of commodity speculation. Who are these shadowy speculators? What is the mechanism by which they supposedly drive up prices? Why doesn't real demand by consumers drive down the speculators' inflation of oil prices? Unlike the coverage on Fox heretofore, the debate would need to be specific, clear and avoid double talk.

Dick Morris is a nice fellow but he lacks understanding of economics or of futures markets. I don't doubt that markets can become inflated as we saw with the tech bubble and housing, but such asset holders risk a crash. There is every reason to think that this would happen and, if so, there would be no need for regulation.

Regulation is the wrong idea, but there is nothing wrong with debating it. In particular, such a debate would clarify why speculation has or has not caused the price increase in oil and why the market will not correct on its own. Morris did not explain this. He could barely say the word "futures contract" and I doubt if he could define the term. There has been futures trading since tulip bulbs went through a price bubble in 17th century Holland and then crashed.

Futures holders must sell their oil when the future contract expires. If consumer demand has been reduced because of high prices, when the contracts expire the oil price will decline.

If this basic pattern is to be violated, O'Reilly, Hannity and Colmes owe it to their viewers to explain the reason clearly instead of putting spin on it like saying "greedy speculators" or having an economic illiterate like Morris say that "paper trading" is causing price increases.

Tuesday, June 10, 2008

Obama v. Hyperion

In ancient Greece the Sun god was known as Helios or Hyperion and later associated with light and so called Apollo. The Anchoress (hat tip Larwyn)provides evidence that Hyperion is a Republican for, alas, he does not believe in global warming. According to Anchoress:

"Some scientists think the “warming trend” which (despite the fact that we’re having our usual early-June heatwaves) has stalled out over the past few years was helped along by sunspots. And lately, there aren’t any...It continues to be dead,” said Saku Tsuneta with the National Astronomical Observatory of Japan, program manager for the Hinode solar mission...Today’s sun, however, is as inactive as it was two years ago, and scientists aren’t sure why...In the past, they observed that the sun once went 50 years without producing sunspots. That period, from approximately 1650 to 1700, occurred during the middle of a little ice age on Earth that lasted from as early as the mid-15th century to as late as the mid-19th century."

The Anchoress wonders: "It’s not like we can do anything about it. Either old Sol will spot and flare or he won’t."

But the Democrats know what to do. Sue. Send the Trial Lawyers Association to civilly enforce global warming. I can see it now, Obama v. Hyperion, with Ron Kuby representing Obama.

Obama and Newsweek

Mark Hemingway has written an excellent article on NRO Online. Hemingway notes:

"Obama didn’t vote on an amendment sponsored by Lieberman and Arizona Republican Jon Kyl last fall that would have classified the Iranian Revolutionary Guard a terrorist organization for training and funding Hezbollah and otherwise contributing to the killing of Israelis...that didn’t stop him from pillorying Hillary for voting for it, and thereby contributing to the Bush administration’s “saber-rattling” with Iran...Anti-Israel sentiments are all around Obama (Zbigniew Brzezinski, Anthony Lake, Susan Rice, Robert Malley, Joseph Cirincione …). Nevermind that his pastor of 20 years has an affection for Louis “Judaism-is-a-gutter-religion” Farrakhan…"


"two big Obama supporters blame Clinton — without citing any evidence other than hearsay — for disinformation among Jewish voters. And that meets Newsweek’s publication standards?"

Let's face it: Newsweek is to news as Star Trek is to news, and Obama is to McCain as Newsweek is to news.

America Winning the War in Iraq

Hugh Hewitt blogs a NY Post article by Arthur Herman (hat tip Larwyn) that states:

>"AMERICA has won, or is about to win, the Iraq war.

"The latest proof came last month, as the Iraqi army - just a few months ago the target of scorn and abuse from Democratic politicians and journalists - forcefully reoccupied three cities that had served as key insurgency bases (Basra, Sadr City and Mosul).

"Sunnis and Shias alike applauded as their nation's army compelled insurgent militias to lay down their arms. The country's leading opposition newspaper, Azzaman, led the applause for the move into Mosul - a sign that national reconciliation in Iraq is under way and probably irreversible..."

Hewitt points out that Obama has been receiving hundreds of millions of dollars in financial support despite his eagerness to prove Herman wrong and to prove that America has lost. Obama does not express a pro-America game plan, but rather views defeat in Iraq as a way to prove America is a "nice" country so that terrorists will understand how nice the US is and stop being terrorists. Obama's and the left's position is foolish. General Petraeus has demonstrated that a fourth generation warfare strategy will work. The war will wind down soon without the left's and Obama's anti-American posturing.

Bernanke Discovers the Dollar

The valiant New York Sun has printed my letter in its June 10th edition and online here:

'Bernanke Discovers the Dollar'

Thank you for your editorial about the Fed's role in creating inflation ["Bernanke Discovers the Dollar," June 5, 2008].

In the late 19th century the Mugwumps, the educated New Yorkers and Bostonians who opposed the spoils system and big government, were concerned about currency depreciation and inflation that Civil War greenbacks had caused.

In particular, the Mugwumps were concerned that inflation led to the re-distribution of wealth from wage earners and those on fixed incomes to financial speculators like Jay Gould.

Ever since President Nixon jettisoned the international gold standard in 1971, Americans' average real hourly wage has declined. There has been no previous 38-year decline in the real hourly wage.

Modern economists, lacking the Mugwumps' courage, have averted their gaze from link between income inequality and monetary expansion.

But the link is obvious, and it is becoming more severe. In 1884 the Mugwumps bolted the Republican Party to vote for a Democrat, Grover Cleveland, a gold standard proponent.

Let us hope that John McCain offers greater integrity than did Cleveland's 1884 opponent, James Blaine.

Associate Professor of Business and Economics
Brooklyn College
Brooklyn, N.Y.

Hinchey Gas Cap Misguided

The Middleton Times Herald Record printed my June 8, 2008 letter in their Sunday edition and online here

Hinchey gas 'cap' misguided

Rep. Hinchey's recent call for a price control or "cap" on gasoline prices is misguided.

Those who remember the 1970s gasoline lines know that rationing causes shortages. With a "cap," those who need gasoline the most would be unable to get it, while the politically connected would have ample supplies. The "cap" would harm the environment because those who have political access to the gasoline would squander it because of low prices.

New York state's gerrymandering seems to have affected Hinchey's sanity.

Mitchell Langbert

West Shokan

Phil Orenstein's "New McCarthyism"

Over at Democracy Project, Phil Orenstein has written a blog about reaction to his Frontpagemag article "Fantasizing the New McCarthyism". Phil's article concerned accusations that discussion of terrorism and 9/11 constitute "McCarthyism". Universities throw conservative students out of education programs because they lack vague "social justice dispositions" and then call any critic of their tactics "McCarthyist". In particular, Sharad Karkhanis has been victimized by a law suit brought by CUNY union-cum-management activist Susan O'Malley. O'Malley, in an attempt to silence Karkhanis, has sued him for disagreeing with her. However, this does not stop O'Malley from calling others, including the exalted Karkhanis and the noble, distinguished and learned CUNY trustee Jeffrey Weisenfeld "McCarthyist":

"She then directed her venom toward CUNY trustee Jeffrey Wiesenfeld whom she described as so anti-Muslim that it’s a contradiction for him to be on the CUNY board...A number of panelists and people in the audience broke into an emotional discussion about the CUNY board and why they should remove Wiesenfeld."

Note the fixation of Susan O'Malley, the PSC leadership and the campus left in general on "removing" anyone with whom they disagree. University professors are too often bigots, and O'Malley and PSC colleagues have lynch mob tactics up their sleeves. Phil's blog notes:

"O’Malley, a long-standing academic public figure had the gall to sit piously on the panel and use the forum for her personal agenda to paint a far-fetched portrait of lies... ."

Phil notes that Muslim Student Associations sometimes are anti-Semitic, a matter of indifference to the Professional Staff Congress leadership. Phil, quotes my blog about Obama's Teapot Dome cabinet and, as well, his debate with a Satanic blogger (really, see link). When you debate with a Satanist, the devil is in the details!

Phil's courage and commitment are outstanding. Bravo Phil!

Monday, June 9, 2008

Petition to Abolish the Federal Reserve Bank

I just received an e-mail from Ron Holland concerning a petition to abolish the Federal Reserve Bank. I have signed it and have forwarded Ron's e-mail to several friends. Ron's e-mail reads:

>"The Federal Reserve Has Created the Risk of a Global Depression!

>"Please sign, publish or forward our Abolish the Federal Reserve Petition at:

to all your pro-freedom friends and associates. The collapsing dollar, exploding oil and food prices, falling housing market, the subprime mortgage and growing credit crisis and stock market weakness are all a result of earlier Federal Reserve actions designed to maximize Wall Street and banking profits at the expense of productive, working people around the world."

The New York Sun's Home Run

The New York Sun has hit a home run. I had previously blogged about my concern that the Sun's and Fox's coverage of the recent upsurge in prices has omitted the underlying cause: monetary expansion. This is of concern because economists have come up with many nonsensical explanations for inflation such as "cost push" inflation, "demand pull" inflation, unions cause inflation, oil prices cause inflation, consumer expectations cause inflation, speculators cause inflation, ad infinitum and ad nauseum. In the 1970s such spurious explanations reached a crescendo when President Ford wore a button that said "Win" if I recall, and argued that "jaw boning" would stop inflation. Worse, President Nixon had implemented price controls and controls on gasoline prices led to endless lines.

It doesn't take much to expose an unclothed Emperor. The Sun has come out and forthrightly said that the Fed has caused inflation. It will be hard for the mainstream media to spin the kind of fabrications that it spun in the 1970s. The Sun deserves a Pulitzer Prize for this editorial. Perhaps single handedly it will stop the establishment's reluctance to take the necessary steps to end the inflationary cycle and the mainstream media's eagerness to blow smoke in support of inflation.

The media have every reason to fabricate nonsense explanations for inflation. As I have previously blogged, there are special interests that demand inflation: the commercial banks, Wall Street, the real estate business and stock investors. The working man, the conservative saver and the entrepreneur who looks to build a business over the long term are harmed. Thus, in exchange for short term heating of the economy, the public loses entrepreneurial vision, the withdrawal of competent labor (as honest workers are diverted into less productive activities like stock investing), and there are dramatic increases in uncertainty for people on fixed incomes. It is also true that demand for labor is stimulated, but the jobs so created are temporary because the businesses that are created are of insufficient quality to survive the inevitable economic downturn that occurs when the Fed tightens interest rates because it has become politically impossible to continue printing money. By then, fortunes have been extracted from the public by those who had first access to the new money, namely hedge fund managers, and the public pays through higher prices and increased poverty.

Let us applaud the New York Sun and be thankful that at least one firm in lower Manhattan has clear vision and integrity.