Rod Dreher lists several stories (see here and here) indicating just how serious the energy crisis is to our economic well being. It becomes clearer by the day that our policy of loose money and high government debt is damaging our currency and, ultimately, our way of life. I have been railing on the Federal Reserve for lowering interest rates instead of raising them. Here is the Asian Times:
The oil price has doubled in the past year because the US Federal Reserve panicked over risks to the over-leveraged financial system and flooded markets with excess liquidity. The world is willing to pay arbitrarily high prices to hedge against inflation, but the cost of inflation hedges drags down the world economy. Last week's spike in commodity prices and swoon in global stock markets points the way to a deep and prolonged fall in economic activity.
And here is Forbes:
What is happening now is not demand destruction, it is a financial disaster. The U.S. consumes 21 million barrels of per day. At $135 per barrel, the U.S. spends $1.0 trillion per year on oil, which is equal to 15% of the $6.8 trillion in take-home pay of everyone who pays taxes. If oil prices rose to $200 per barrel, the U.S. would spend $1.5 trillion per year on oil, which would be equal to 22% of take-home pay. Moreover, those percentages of 15% and 22% do not even include the cost of coal or natural gas. In other words, the U.S. will be broke long before oil prices hit $200 per barrel, and the rest of the world would be sure to follow.
Still think it is the speculators driving up the price of oil? The ever prescient Robert Samuelson explodes that myth in today's must read:
Speculator-bashing is another exercise in scapegoating and grandstanding. Leading politicians either don't understand what's happening or don't want to acknowledge their own complicity. (snip)
Politicians promise to tighten regulation of futures markets, but futures markets aren't the main problem. Scarcities are. Government subsidies for corn-based ethanol have increased food prices by diverting more grain into biofuels. A third of this year's U.S. corn crop could go to ethanol. Restrictions on oil drilling in the United States have reduced global production and put upward pressure on prices. If politicians wish to point fingers of blame, they should start with themselves.
At least McCain is for drilling off-shore and expanding our nuclear energy capacity. Obama and the Democrats seem to be putting all there eggs into the renewable fuel basket. Only a fool would think that somehow solar and wind energy will even come close to meeting our energy needs in the short, medium and even distant future. Fossil fuels must remain part (I said part) of the energy solution. But not if you are the majority leader of the United States Senate, who took a short break from looking for unicorns to unload this whopper:
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