Wednesday, July 2, 2008

Oil speculation is not the problem

Please watch the following videos, dramatic readings of an article by Alan Greenspan:

http://www.youtube.com/watch?v=ZoNW7u3TBi8
http://www.youtube.com/watch?v=-F2jDJS60YU&feature=related

The current rhetoric out of Washington - supported by a chorus of unwitting populists - is to "regulate" oil speculation. The express purpose of this regulation is to prohibit hedge funds from moving assets into oil. This is because oil behaves a lot like gold, at least in ways that are important for sheltering assets from government policy uncertainty and inflation of the money supply. If we substitute "oil speculation" for "gold standard" in the tail end of Greenspan's discussion, as read in the above videos, we have the following:

In the absence of [oil speculation] there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal as was done in the case of gold. If everyone decided, for example to convert all his bank deposits into silver or copper or [oil] and thereafter declined to accept checks as payment for goods, the bank deposits would lose their purchasing power and government created bank credit would be worthless as a claim on goods.

The financial policy of the welfare state requires that there be no way for owners of wealth to protect themselves. This is the shabby secret of the welfare statist's tirades against [oil speculation]. Deficit spending is simply a scheme for the hidden confiscation of wealth. [Oil speculation] stands in the way of this insidious process. it stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statist's antagonism towards [oil speculation].

Of course this isn't completely true, as rephrased, but you get the gist. Because of the numerous regulations on gold ownership, it is more complicated to purchase gold than oil futures. Oil speculation is serving as a shelter of wealth from political threats and inflation of the money supply.

You might ask, "So what? Why should I care about protecting the wealthy?" Oh, but it's not the wealthy who are trying to protect their wealth in oil futures - the very wealthiest of them all (central bankers, finance and industry magnates, etc.) are the ones with an interest in keeping regular Joes from protecting what little wealth they have managed to accrue in life from the ravages of central bank inflation because they profit from inflation.

What you have to keep in mind with counterfeiting (inflation, deficit spending/public debt), is that it's not just the counterfeiter who profits at the expense of all users of the currency. Those businesses at which the counterfeit monies are initially spent also profit significantly from the infusion of cash and the businesses at which they subsequently re-spend those counterfeit dollars also benefit, though a little less, and so on until the counterfeit money has diffused into the ordinary money supply and the rest of us are all left just slightly worse off. So, the central bankers and industry magnates have an alignment of interest with the government in inflating the money supply and running up public debt through deficit spending.

What the unwitting populists (e.g. Andyman) need to understand is that, for all their good intentions, they are supporting monetary policies that simply go to line the pockets of the wealthiest businessmen in the world: the central bankers and other industry magnates at the head of the counterfeiting fountain. Sure, it props up the welfare state, too, but only at the expense of infusing cash into the private industries owned by the wealthiest people in the world who keep the counterfeiting presses well-oiled.

The problem comes with our toleration of impunitive violations of private property rights. When you open the Pandora's Box of allowing a special class of people (government) to take property from some groups of society (e.g. "the rich") and give it to other groups of society (e.g. "the poor"), who do you think will benefit most? Neither the givers nor receivers ultimately benefit, only the special class with the power to redistribute. Those who control the class with the power to violate private property rights (government) have the potential to substantially enrich themselves. And in the struggle to control the government's redistributive powers, who do you think will most likely win? The poor? Or the wealthy? Do you think that because Warren Buffet or George Soros or Bill Gates have just one vote, they have no more say in how things are run than you do?

The power to own commodities, like oil and gold, is, as Greenspan notes, the cornerstone of economic freedom. The two go hand in hand. To acquiesce to fiat currency, legal tender, taxation, inflation, and public debt generated by deficit spending is nothing other than to acquiesce to slavery. The power to own wealth is freedom. The prohibition on wealth ownership is nothing other than slavery. And only gold, oil or physical commodities whose value cannot be counterfeited can reliably represent wealth. National currencies only represent wealth to the extent that the central banking systems act "as if" their currency is on the gold standard, that is, refrain from counterfeiting.

The welfare statist's* answer is often full nationalization of the central banking system, but this doesn't change a thing... the global bankers, industry magnates, etc. who drink at the head of the counterfeiting fountain benefit from the fully nationalized counterfeiting operations (e.g. Bank of England) as much as any. The only difference may be that the formalities are a little different. Either way, the power to redistribute wealth by any means is a "peaceful" or steady-state version of the power to kick someone's door down and expropriate their belongings at the end of a sword or gun. It's slavery.

*Please do not misunderstand this as a left-right issue - the military-welfare state is exactly the same deal with a different outlet to the counterfeiting fountain, the Pentagon. But the same jokers benefit either way.

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