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Getbig Main Boards => Politics and Political Issues Board => Topic started by: howardroark on January 19, 2012, 10:15:56 AM
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I'm compiling any and all information I can get on economics in this thread. Others are welcome to post their own videos, articles, opinions, etc. Also, if you want me to look up any material, just let me know by commenting in this thread.
Content:
1. Keynesian Predictions and Depression of 1920 (http://www.getbig.com/boards/index.php?topic=410575.msg5876052#msg5876052)
2. Hoover's Stimulus (http://www.getbig.com/boards/index.php?topic=410575.msg5876078#msg5876078)
3. Calvin Coolidge Economic Performance (http://www.getbig.com/boards/index.php?topic=410575.msg5876124#msg5876124)
4. The Laffer Curve (http://www.getbig.com/boards/index.php?topic=410575.msg5876158#msg5876158)
5. Capital-Based Macroeconomics & Friedman's Plucking Model (http://www.getbig.com/boards/index.php?topic=410575.msg5876190#msg5876190)
6. Ron Paul's Approach to Economics (http://www.getbig.com/boards/index.php?topic=410575.msg5876217#msg5876217)
7. Free Trade & Gasoline Prices (http://www.getbig.com/boards/index.php?topic=410575.msg5878430#msg5878430)
8. "Big Oil's" Small Profits (http://www.getbig.com/boards/index.php?topic=410575.msg5878435#msg5878435)
9. Inflation Fueling Gasoline Prices (http://www.getbig.com/boards/index.php?topic=410575.msg5878442#msg5878442)
10. Government Drives Gasoline Prices Higher (http://www.getbig.com/boards/index.php?topic=410575.msg5878455#msg5878455)
11. The Great Boom & Bust with Ben Powell, PhD (http://www.getbig.com/boards/index.php?topic=410575.msg5878480#msg5878480)
12. Keynesian Economics Is Wrong (http://www.getbig.com/boards/index.php?topic=410575.msg5878498#msg5878498)
13. Peter Boettke, GMU Economist, Explains Austrian Economics (http://www.getbig.com/boards/index.php?topic=410575.msg5881183#msg5881183)
14. Peter Schiff vs. Keynesian economist Laurence Kotlikoff (http://www.getbig.com/boards/index.php?topic=410575.msg5881220#msg5881220)
15. Why Your Grandfather's Economics Was Better Than Yours (http://www.getbig.com/boards/index.php?topic=410575.msg5881512#msg5881512) <<< Highly Recommended
16. The Business Cycle Explained In Five Minutes (http://www.getbig.com/boards/index.php?topic=410575.msg5881577#msg5881577)
17. The Fed Should Be Abolished - Thomas Sowell (http://www.getbig.com/boards/index.php?topic=410575.msg5887048#msg5887048)
18. Nothing is Free - Milton Friedman (http://www.getbig.com/boards/index.php?topic=410575.msg5891230#msg5891230)
19. The Roots of Economic Growth (http://www.getbig.com/boards/index.php?topic=410575.msg5893633#msg5893633)
20. New Support for Friedman's Plucking Model (http://www.getbig.com/boards/index.php?topic=410575.msg5908882#msg5908882)
21. Bush Deficits Explained (http://www.getbig.com/boards/index.php?topic=410575.msg5910327#msg5910327)
22. Vienna School vs. Chicago School on Monetary Economics (http://www.getbig.com/boards/index.php?topic=410575.msg6004650#msg6004650)
23. Health Care Economics (http://www.getbig.com/boards/index.php?topic=410575.msg6005030#msg6005030)
24. The Myth of Science as a Public Good (http://www.getbig.com/boards/index.php?topic=410575.msg6038508#msg6038508)
Content By Topic
Business Cycle Theory
Capital-Based Macroeconomics & Friedman's Plucking Model (http://www.getbig.com/boards/index.php?topic=410575.msg5876190#msg5876190)
Why Your Grandfather's Economics Was Better Than Yours (http://www.getbig.com/boards/index.php?topic=410575.msg5881512#msg5881512)
The Business Cycle Explained In Five Minutes (http://www.getbig.com/boards/index.php?topic=410575.msg5881577#msg5881577)
The Austrian School of Economics
Capital-Based Macroeconomics & Friedman's Plucking Model (http://www.getbig.com/boards/index.php?topic=410575.msg5876190#msg5876190)
Ron Paul's Approach to Economics (http://www.getbig.com/boards/index.php?topic=410575.msg5876217#msg5876217)
The Great Boom & Bust with Ben Powell, PhD (http://www.getbig.com/boards/index.php?topic=410575.msg5878480#msg5878480)
Peter Boettke, GMU Economist, Explains the Austrian School (http://www.getbig.com/boards/index.php?topic=410575.msg5881183#msg5881183)
Why Your Grandfather's Economics Was Better Than Yours (http://www.getbig.com/boards/index.php?topic=410575.msg5881512#msg5881512)
The Business Cycle Explained In Five Minutes (http://www.getbig.com/boards/index.php?topic=410575.msg5881577#msg5881577)
The Roots of Economic Growth (http://www.getbig.com/boards/index.php?topic=410575.msg5893633#msg5893633)
Keynesian Economics
Keynesian Predictions and The Depression of 1920 (http://www.getbig.com/boards/index.php?topic=410575.msg5876052#msg5876052)
Keynesian Economics is Wrong (http://www.getbig.com/boards/index.php?topic=410575.msg5878498#msg5878498)
Peter Schiff vs. Keynesian economist Laurence Kotlikoff (http://www.getbig.com/boards/index.php?topic=410575.msg5881220#msg5881220)
Supply-Side Economics
The Laffer Curve (http://www.getbig.com/boards/index.php?topic=410575.msg5876158#msg5876158)
Why Your Grandfather's Economics Was Better Than Yours (http://www.getbig.com/boards/index.php?topic=410575.msg5881512#msg5881512)
Economic History
Hoover's Stimulus (http://www.getbig.com/boards/index.php?topic=410575.msg5876078#msg5876078)
Calvin Coolidge Economic Performance (http://www.getbig.com/boards/index.php?topic=410575.msg5876124#msg5876124)
Why Your Grandfather's Economics Was Better Than Yours (http://www.getbig.com/boards/index.php?topic=410575.msg5881512#msg5881512)
Gasoline & Oil Prices
Free Trade & Gasoline Prices (http://www.getbig.com/boards/index.php?topic=410575.msg5878430#msg5878430)
"Big Oil's" Small Profits (http://www.getbig.com/boards/index.php?topic=410575.msg5878435#msg5878435)
Inflation Fueling Gasoline Prices (http://www.getbig.com/boards/index.php?topic=410575.msg5878442#msg5878442)
Government Drives Gasoline Prices Higher (http://www.getbig.com/boards/index.php?topic=410575.msg5878455#msg5878455)
Milton Friedman, Thomas Sowell, and Miscellaneous Chicago School Stuff
The Fed Should Be Abolished - Thomas Sowell (http://www.getbig.com/boards/index.php?topic=410575.msg5887048#msg5887048)
Nothing is Free - Milton Friedman (http://www.getbig.com/boards/index.php?topic=410575.msg5891230#msg5891230)
Miscellaneous Microeconomic Issues
Health Care Economics (http://www.getbig.com/boards/index.php?topic=410575.msg6005030#msg6005030)
The Myth of Science as a Public Good (http://www.getbig.com/boards/index.php?topic=410575.msg6038508#msg6038508)
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Pretty funny and informative lecture, worth watching/listening to:
Here is some more info about the Depression of 1920 and what it means to the economics profession:
Here are the Glenn Beck cliff notes on the Depression of 1920:
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Something I find particularly annoying is this myth that Hoover was somehow "laissez faire," when nothing could be further from the truth.
Here is Hoover announcing his economic stimulus plan, not laissez faire in the least:
"Some of the reactionary economists urged that we should allow the liquidation to take its course until we had found bottom.... We determined that we would not follow the advice of the bitter-end liquidationists and see the whole body of debtors of the United States brought to bankruptcy and the savings of our people brought to destruction...Instead we met the situation with proposals to private business and to Congress of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic." -Hoover
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Something I find particularly annoying is this myth that Hoover was somehow "laissez faire," when nothing could be further from the truth.
Here is Hoover announcing his economic stimulus plan, not laissez faire in the least:
"Some of the reactionary economists urged that we should allow the liquidation to take its course until we had found bottom.... We determined that we would not follow the advice of the bitter-end liquidationists and see the whole body of debtors of the United States brought to bankruptcy and the savings of our people brought to destruction...Instead we met the situation with proposals to private business and to Congress of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic." -Hoover
Exactly, but that is histories meme, that is what is pushed in schools and on television.
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Calvin Coolidge - Back when Presidents were classy. Cut top income tax rate from 65% to 20%; by the end of his term 98% of Americans didn't pay any income tax. Economic growth averaged 7% per year, inflation 0.4%, and unemployment 3.3%. He also cut the national debt by 25%. Born on the 4th of July. Most famous quote: "The business of America is business."
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Learning about the Laffer curve:
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Lecture by Roger Garrison PhD on an alternative theory of the business cycle:
Here is an article by Garrison explaining Friedman's plucking model and its relation to business cycle theory: http://www.auburn.edu/~garriro/fm1pluck.htm (http://www.auburn.edu/~garriro/fm1pluck.htm)
(http://www.auburn.edu/~garriro/plucker.gif)
Friedman's plucking model is also a good refutation of the standard Keynesian explanation of the boom-bust cycle.
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Here is a lecture explaining Ron Paul's approach to economics:
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Pretty funny and informative lecture, worth watching/listening to:
Here is some more info about the Depression of 1920 and what it means to the economics profession:
Here are the Glenn Beck cliff notes on the Depression of 1920:
I saw that first clip before. Very good stuff.
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Great thread.
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Great thread.
This.
Dont have time to watch them all while in class, but definatley will when home.
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Not something I recommend watching all at once :P
I'm compiling it more as a reference that you can go to when you want to learn something (e.g. Laffer curve).
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http://mises.org/daily/2008 (http://mises.org/daily/2008)
The Path to Lower Gas Prices: Free Trade
Mises Daily: Thursday, January 12, 2006 by Robert Karl Merting
There are many reason the price of gas is higher than it otherwise would be in a pure market setting. But one reason has received virtually no attention. Gas imports are taxed more highly than oil imports, a protectionist arrangement that benefits domestic refineries (in the short run) but harms consumers every day.
First some background.
The increase in the price of gasoline has been a concern to all who take interest in the American economy. While prices today are not nearly as high, in real terms, as those of the early eighties, the recent doubling in energy costs certainly places a damper on the economy.
Congress is threatening the oil industry with a "windfall profit tax" for their "excessive profiteering," and wall street, by all appearances, is circling the wagons and preparing for the worst, even while non-energy company profits continue to grow at respectable rates. Meanwhile, the government has managed to erect barriers to entry for refineries and heavily tax the very lifeblood of machinery, oil.
The effects of taxes and regulation on the price of gasoline have been well documented. In South Carolina, consumers are made aware of the 35.2 cents tax per gallon by stickers conveniently placed on the pump. This is a two part tax with 18.4 cents going to the Federal government and 16.8 cents going to South Carolina, and the latter portion varies from a little under 10 cents to about 40 cents depending on the state.
This tax has the effect of increasing the price of gasoline, especially when the demand for a product, such as gas, is inelastic[1] even in the long run, reducing the volume sold in the country, trimming profits, and suffocating incentives to develop new wells and invest in refineries.[2]
Regulation is nothing more than a tax where the government chooses to take it's revenue in the form of goods, such as pollution reduction, paperwork in triplicate, and graft, rather than in tax dollars, but the effect is the same as bilking the industry out of it's profits through taxes.
The combination of high taxes and complicated regulations have prevented the construction of refineries in the United States since 1976. Aramco, an oil company owned by Saudi Arabia, has even offered to build two new refineries in the United States; but only if "someone else obtains all the necessary environmental permits first."[3] It is not surprising that America's refining capacity hasn't increased since the early eighties.
Unfortunately the above-mentioned problems are not the only source of gasoline's high price. A lesser known tariff is affecting our gas market everyday, and effectively boosts the profits enjoyed by our domestic refineries. As any good Austrian economist knows, tariffs are a protectionist measure, that, in the long run, will prove detrimental to the very industry meant to be protected. Under tariffs, and protectionism in general, inefficient firms are supported and competition is inhibited; this reduces the incentive for a firm to remain competitive and productive and will eventually result in a correction when regulations are lifted, or foreign firms become much more efficient than their domestic counterparts.
Keynes may have concluded that "in the long run we are all dead," and his thoughts certainly find sympathy with Groucho Marx who asks "Why should I care about posterity? What's posterity ever done for me?," but America has proven to be an ongoing concern and the long run should be considered. Protectionism is an outdated part of the antiquated mercantilist theory, and America should not be persuaded to wall off oil refineries from foreign competitors in one of our most important and vital commodities.
A 42 gallon barrel of crude can be turned into 44.77 gallons of merchantable products. Further investigation shows a barrel of crude oil yields, on average, 19.65 gallons of gas and 4.07 gallons of jet fuel, combined; this is well over half a barrel of the best product, and there is still a whole host of other derivatives manufactured from the same barrel.[4] Refining oil, and then transporting the finished good, is no more cost effective than transporting oil, and then refining. This is apparent in practice since refineries tend to be near their markets, and most long distance shipping is for oil. The transportation of oil is actually more efficient since a pipeline can be built to pump a conglomerate of goods, rather than having to ship individual products in separate containers.
The tariff on gasoline and jet fuel imported into America is 52.5 cents a barrel compared to only 5.25 cents a barrel for unrefined crude: To simplify, the tariff on these finished goods is ten times the tariff on the unrefined oil.[5] This translates into 1.25 cents per gallon of gasoline added to the cost of importing. This seemingly minor margin can give domestic producers an edge in the American market.
According to ConocoPhillips, refining and marketing profits for the third quarter of 2005 were 9 cents per gallon with an average price of $2.60 per a gallon of gasoline.[6] Without trade limited by a tariff on gasoline, profits would be squeezed, roughly, to 8 cents a gallon.[7] Thus the tariff increases refineries' profits by 12.5%, or 1 cent on the gallon.
As any entrepreneur knows, a 12.5% increase in profits is remarkable. Protectionism such as this allows inefficient refineries to continue to operate within the United States, while competitors are prevented from importing gas at market prices. From the consumers' perspective, the extra one cent on the gallon translates into 42 cents on the barrel, and at 20 million barrels per day the American consumer spends an extra $8.4 million each day to support domestic refineries.
Further complicating the importation of refined gas is America's obstinate application of environmental restrictions to foreign countries. Venezuela has filed complaints with the World trade Organization several times over Congress's and the EPA's requirements for cleaner refining. America, Venezuela charges, studied her own refineries, decided a 15% decrease in emissions was necessary, and then required Venezuela to do the same, without examining the emissions of Venezuelan refineries.[8] This global application of EPA requirements is Congress's peace offering to domestic refineries after requiring them to meet stringent clean air requirements, and the tab of course is being picked up by every consumer of gasoline in America.
Eliminating the tariff on gasoline would not make a noticeable difference in prices at the pump, but would, more than some misapplied "windfall" tax, send a clear message to the oil industry that inefficiency among our domestic refineries will not be tolerated. To measurably reduce the price of gasoline the government should eliminate the excise tax placed on each gallon and reduce the regulations the industry must comply with. If America proves unwilling to reduce regulation on refineries, then the oil industry will simply move their operations off shore and import the finished good, and this natural progress should not be impeded by a mercantilist application of protectionism for the benefit of our overly burdened, inefficient domestic refineries.
Robert Merting is a student at Wofford College. Send him mail. Comment on the blog. Listen to a recent interview with Robert online at Mises.org.
[1] The exact measurement, according to Molly Espey is -.42. Espey, Molly, "Explaining the Variation in Elasticity Estimates of Gasoline Demand in the United States: A Meta-analysis," The Energy Journal, 17, 1996.
[2] For a more thorough covering of the effects of a tax read William Anderson's article "Fallacies of the Oil Tax." November, 2006
[3] Featherstone, Charles, "The Myth of 'Peak Oil,'" January, 2006
[4] Energy Information Sheets, "Crude Oil Production," January, 2006
[5] Energy Information Sheets, "Taxes," January, 2006
[6] ConocoPhillips, "Oil Company Profits," January, 2006
[7] This number is calculated using the inelasticity of demand for Oil.
[8] American.edu, "US-Venezuela Gas,", January, 2006
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http://mises.org/daily/2940 (http://mises.org/daily/2940)
Economics 101: The Price of Gas
Mises Daily: Tuesday, April 22, 2008 by Sterling T. Terrell
(http://images.mises.org/DailyArticleBigImages/2940.jpg)
Gas prices are up and oil executives are once again testifying before Congress. Clearly, many politicians, pundits, and consumers lament the rising cost of gas. Before we join them in their chorus, let us take a step back and ask this question: Are gas prices really all that high?
A change in price can be a result of inflation, taxes, changes in supply and demand, or any combination of the three.
First, we need to take into account inflation. The result of the Federal Reserve printing too much money is a loss of purchasing power of the dollar: something that cost $1.00 in 1950 would cost about $8.78 today. As for gas prices, in 1950 the price of gas was approximately 30 cents per gallon. Adjusted for inflation, a gallon of gas today should cost right at $2.64, assuming taxes are the same.
But taxes have not stayed the same. The tax per gallon of gas in 1950 was roughly 1.5% of the price. Today, federal, state, and local taxes account for approximately 20% of gas's posted price. Taking inflation and the increase in taxes into account (assuming no change in supply or demand) the same gallon of gas that cost 30 cents in 1950 should today cost about $3.13.
Neither have supply or demand remained constant. The world economy is growing. China and India are obvious examples. At the same time, Americans continue to love driving SUVs and trucks. As for supply, we are prohibited (whatever the reasons may be) from using many of the known oil reserves in our own country. Furthermore, due to government regulation, the last oil refinery built in the United States was completed in 1976. In addition, the Middle East is politically unstable which leads to a risk premium on the world's major source of oil. It is obvious that the demand for oil has grown while supplies have been restricted.
The average price of gas in the United States today is approximately $3.25. The question is, why are gas prices not higher than they are?
Blaming greedy oil companies on the rising price of gas is simply irresponsible. The profit margins of a few selected industries are as follows:
Periodical Publishing 24.9%
Shipping 18.8%
Application Software 22.5%
Tobacco 19%
Water Utilities 10.2%
Major Integrated Oil and Gas 9.5%
Hospitals 1.4%
Drugstores 2.8%
The water utility industry has higher profit margins than major oil and gas firms! Why isn't every CEO with profit margins above that of the oil companies made to testify before Congress for "price gouging"? Clearly, greedy corporate profits are not the issue.
Again, while just over nine percent of the price of a gallon of gas goes to oil company profits, approximately twenty percent of the price of a gallon of gas is composed of federal, state, and local taxes.
Those who want the government to step in and do something about the high price of gas are either forgetful of recent history or too young to remember the oil crisis of 1979. During that time, restrictions on the price of gasoline led to the inability of some to find gas at all. Price ceilings always lead to shortages. The only thing worse than having to pay "too much" for gas is not being able to find gas at any price.
Let us not be swayed by politicians out for power or by reporters out to create news where none exists. Facts and economic logic should prevail rather than rhetoric.
Sterling T. Terrell is a Ph.D. candidate in the department of agricultural and applied economics at Texas Tech University. Send him mail. Comment on the blog.
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http://mises.org/daily/5255 (http://mises.org/daily/5255)
Another Reason to End the Fed
Mises Daily: Tuesday, May 03, 2011 by Mark Brandly
(http://images.mises.org/GasFed.jpg)
In his first press conference as chairman of the Federal Reserve, Ben Bernanke discussed rising gasoline prices, blaming higher demand from emerging economies and Mideast oil-supply disruptions as the cause of the zooming prices. Bernanke did not mention the US government's role in the higher energy prices,[1] and he explicitly absolved the Federal Reserve of any blame.
According to Bernanke, "there's not much the Federal Reserve can do about gas prices, per se, at least not without derailing growth entirely, which is certainly not the right way to go. After all, the Fed can't create more oil. We don't control the growth rates of emerging market economies." (Here is a transcript and a video of Bernanke's press conference and here is a video of his remarks about gasoline.)
Bernanke's deceitfulness is appalling, although not unexpected. He knows that Federal Reserve monetary policy plays a significant role in gasoline prices. Expansionary monetary policy leads to more dollars being available in world currency markets and weakens the dollar. The weaker dollar results in higher import prices. More than half of the oil consumed in the United States comes from foreign producers, and because oil is the main input needed to produce gasoline, higher oil prices mean higher gasoline prices.
In the last decade, the Federal Reserve has engaged in almost-unprecedented easy monetary policies. The broadest measure of the money supply is called M3. According to estimates at Shadowstats.com, until the financial collapse of 2008, M3 was continuously increasing at a rate anywhere from 5 to 15 percent annually. This money creation by the Federal Reserve led to the unsustainable boom of the Bush years and the economic meltdown that we have experienced in the last three years.
In addition, this rapid monetary expansion led to the decline of the dollar in currency markets.[2] The value of the dollar peaked in the summer of 2001. From June 2001 to the end of March 2011, the dollar depreciated 40 percent relative to the euro, from €1.18/$1 to €.704/$1. During this period, the US spot price of oil increased 348 percent in terms of dollars (from $23.38 to $104.64 per barrel). But in terms of euros, those same oil prices only increased 167 percent (from €27.59 to €73.67 euros per barrel). If the dollar had held steady relative to the euro at the exchange rate of 1.18 euros per dollar, then the US spot price for oil at the end of March would have been $62.42 per barrel.
Consider the impact that this has had on gasoline prices. To make the calculations easy, let's say that the current price of gasoline is $4 per gallon. Oil costs are 68 percent of the price of gasoline. That means that oil costs make up $2.72 of the $4 gasoline price. The dollar's depreciation relative to the euro in the last decade was 40 percent; and 40 percent of $2.72 is $1.09.
Therefore, if the dollar had held steady with the euro, we would be paying roughly $2.91 for a gallon of gasoline that now costs us $4. Gasoline prices would be 27 percent lower today if the dollar had held its value relative to the euro over the last decade. It's true that there is little the Federal Reserve can do to bring oil and gasoline prices down. Federal Reserve policies have already weakened the dollar leading to higher oil prices, and this damage cannot be undone. However, over a long period of time, the Federal Reserve has had a major impact on energy prices. And things are going to get worse. Due to the Federal Reserve's bank bailouts and quantitative-easing policies, we should anticipate much higher gasoline prices.
Barack Obama and his attorney general blame high gasoline prices on oil speculators. The chairman of the Federal Reserve blames supply disruptions and the growing economies of the world. We see this all the time. Elected officials and other agents of the state never accept any blame for the destruction created by their policies. Others are always at fault. In this case, however, we can clearly see that the Federal Reserve bears much of the responsibility for the economic damage of high gasoline prices. We can add high oil and gasoline prices to our long list of reasons why we should end the Fed.
Mark Brandly is a professor of economics at Ferris State University and an adjunct scholar of the Ludwig von Mises Institute.
Notes
[1] In a recent article, I explained how government intervention leads to higher gasoline prices. By imposing taxes on gasoline sales, reducing the supply of oil by taxing oil production, limiting drilling by banning exploration in some areas, and purchasing oil to be stored in the Strategic Petroleum Reserve, the government gouges gasoline buyers and generates profits for OPEC.
[2] Admittedly, other factors such as the inflation of euro and the demand for dollars and euros also affect the dollar-exchange rate. However, the Federal Reserve admits that its policies have a significant effect on exchange rates. See The Federal Reserve: Purposes and Functions, p. 24.
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http://mises.org/daily/5111/What-Can-We-Do-about-Gasoline-Prices (http://mises.org/daily/5111/What-Can-We-Do-about-Gasoline-Prices)
What Can We Do about Gasoline Prices?
Mises Daily: Tuesday, March 15, 2011 by Mark Brandly
(http://images.mises.org/AlmostEmpty.jpg)
Rocketing gasoline prices are causing consumer unrest. Government officials blame oil speculators, corporate greed, and OPEC, anyone but themselves. However, the US government has spent decades implementing policies that drive up gasoline and oil prices. From the oil-price controls of the 1970s to the windfall-profits tax of the 1980s to George W. Bush's order to purchase oil for the Strategic Petroleum Reserve, the aim of government policy appears to be to hurt gasoline buyers.
Because government is a main cause of high gasoline prices, the solutions for alleviating this problem are obvious; stop government intervention in energy markets and allow private markets to determine oil and gasoline prices.
First, the federal and state governments should eliminate the gasoline tax. The federal gasoline-excise tax is 18.4 cents per gallon and the combined federal and state gasoline taxes run from 26.4 cents per gallon in Alaska to 66.1 cents in New York. Federal and state taxes average 48.1 cents per gallon.Download PDF Increases in the price of gasoline do not have a large effect on the volume of gasoline purchases, so most of the gasoline taxes result in higher gasoline prices for buyers.
Even though gasoline sellers are legally liable to pay the tax, the tax burden is shifted onto the buyers in the form of higher prices. Therefore, eliminating the gasoline taxes would result in an average savings of nearly 48 cents per gallon. Of course, eliminating these taxes would result in a reduction in state- and federal-tax revenues. Given the bloated state of the government budgets, this would be an additional benefit of ridding ourselves of these taxes.
The next issue is the government policies that restrict oil production. Before I discuss these policies, I would like to point out the hypocrisy of our government officials. Our political leaders criticize other countries, particularly the OPEC countries, for restricting their oil production in order to drive up oil prices. But many US government policies restrict US oil production. Beyond the hypocrisy in this issue, it's important to point out that US policies seem to be geared to helping OPEC maintain high oil prices.
It's estimated that oil costs are 68 percent of gasoline prices.Download PDF Lower oil prices would lead to lower gasoline prices. So the second necessary reform would be the elimination of oil taxes. Many of the oil-producing states impose heavy taxes, called severance taxes, on oil production. Alaska leads the pack with top rates that exceed 25 percent of oil revenues. Severance taxes are taxes on revenues, not profits. If an oil well has a 5 percent profit margin, but the severance tax rate is 7 percent, then that well is no longer profitable. Such wells are plugged and abandoned. The tax also results in fewer wells being drilled. Eliminating severance taxes would increase oil production, leading to lower gasoline prices.
My third recommendation is to lift the drilling bans on federal lands and offshore areas. The federal government owns about 650 million acres of land — nearly 30 percent of all of the land in the United States — and much of this land contains oil reserves. While drilling is allowed in some of these regions, in some oil rich areas, such as the Arctic National Wildlife Refuge, drilling is off-limits.
The federal government also claims to own the "submerged lands" up to 200 nautical miles off of the coast of the United States. Because it owns these lands, it can ban drilling in the outer continental shelf. These areas should be opened for offshore drilling. If the drilling, either in the OCS or in ANWR, violated anyone's property rights, say in the form of oil spills, the offending parties should be required to pay the victims for any damage to their private property.
Even if these areas were opened up for drilling, it would take years to develop this production. Nevertheless, we would see the benefits of this drilling before any oil was actually produced. Oil markets are forward looking. If oil producers anticipate increased production in the future, this will tend to lead to lower prices today. Producers will want to sell more of their oil today instead of holding it until prices are lower in the future.
We see the reverse occurring today. Part of the reason that oil prices are rising is that sellers anticipate higher future prices. If they anticipated lower future prices, today's prices would tend to be lower.
Fourth, the oil in the federal Strategic Petroleum Reserve should be sold and the SPR program should be abandoned. The SPR was started in the 1970s in response to the Arab oil embargo. Since then, the government has purchased oil and stored that oil in this reserve. The reserve currently has about 730 million barrels worth more than $70 billion at current oil prices. The purported purpose of the SPR is that it is to be used in case of an emergency in the oil markets. However, instead of using it to relieve us from the burden of high oil prices, it has sometimes been used to keep oil prices up. When the price of oil started to fall during the Bush regime, George Bush ordered an increase in the SPR in order to "stabilize" oil prices.
The SPR program is ridiculous: Oil companies invest in drilling oil wells. They pump the oil out of the ground. The federal government then uses tax dollars to purchase the oil and pump it into salt caverns 2,000–4,000 feet beneath the ground. If we want to use the oil, we will have to pump it out of the ground a second time. We pump oil out of the ground, pump it back into the ground, and then pump it out again. It would be more efficient to store the oil in its original underground formation and allow private oil companies to decide when to pump it out.
The government should sell the oil in the SPR and use the revenues to reduce the deficit. I recommend that they announce that they are going to sell one million barrels a day. At a price of $100 a barrel, that sale would generate $100 million of revenue daily that could be used to reduce federal borrowing by an equivalent amount.
The million barrels a day of SPR sales will offset the decrease in oil production cause by the political unrest in Libya. Regardless of what happens in Libya, however, the feds should continue to sell one million barrels a day. In two years, the SPR would be empty and the federal government would be out of the oil business. The two-year time horizon would give oil producers time to adjust their production decisions based on this change in government policy.
So, if the government removed the taxes on gasoline sales, eliminated the severance taxes on oil production, allowed drilling in the areas where it's now banned, and sold the oil in the SPR, we would actually get some lower oil prices.
Other government policies, such as destroying the value of the dollar and fighting wars in and around Middle Eastern oil-producing countries, also drive up gasoline prices. But that is a discussion left for another day.
Mark Brandly is a professor of economics at Ferris State University and an adjunct scholar of the Ludwig von Mises Institute.
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On June 21, 2011 Ben Powell, Associate Professor of Economics at Suffolk University, lectured at the Freedom University: Current Events Seminar. In this video Ben discusses the Housing Boom and Bust.
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Howard for Mod--
If we need to replace an existing Mod-- Hugo Chavez should get his walking papers.
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You flatter me, George, but why the fuck would I want to be mod? lol
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Coolidge was easily the most underrated President of the 20th Century
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Coolidge was easily the most underrated President of the 20th Century
Warren Harding was probably more underrated. I'll include a post about him. And then maybe one about Martin Van Buren, who also was a great President. Might include posts regarding Jefferson and Jackson too, we'll see.
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I recommend everyone go buy Henry Hazlitt's "Economics in one lesson"
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http://www.zerohedge.com/news/peter-boettke-explains-austrian-economics
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http://www.zerohedge.com/news/peter-boettke-explains-austrian-economics
Excellent article!
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You flatter me, George, but why the fuck would I want to be mod? lol
Ron has a very generous compensation package available. One day unpaid vacation, 10% off muscletech products at a GNC in Palo Alto California and a free getbig tee shirt with a picture of Vince Goodrum in a posedown against Billy Guns.
My question is, why the fuck wouldn't you want to be a mod?
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10% off muscletech products? Now you're talking! :D ::) 8)
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The interview brings out a fundamental disagreement between the classical and Austrian economists vs. the Keynesians. Keynesians view depressions as deficient aggregate demand - classical and Austrian economists view depressions as a mismatch between the structure of demand and the structure of supply. This is because the classical and Austrian economists accept (and understand) Say's law, while Keynesians reject (and don't understand) it.
Say's law is basically the proposition that "supply constitutes demand," or that aggregate (total) supply cannot exceed aggregate (total) demand. What this means is that all the purchasing power in the economy is derived from the production of goods - thus, one cannot stimulate demand by printing more money or by spending more, since this fails to increase purchasing power. The only way to conceivably increase purchasing power (and thus demand) is by producing more (increasing supply). This is the REAL supply-side economics.
Keynes "refuted" Say's law by claiming that if Say's law were true, then there would never be depressions or involuntary unemployment. But this is false - the classical economists, including JB Say, explained the occurrence of depressions as a mismatch between supply and demand, meaning that the products consumers demanded were not being produced in sufficient quantities while the goods being produced were not the ones that consumers wanted. Thus, purchasing power collapsed and the economy was sent spiraling into a depression, until the point when resources were reallocated from the industries producing goods that were not demanded to the industries producing goods that were demanded. At that point, the economy would recover as purchasing power would rise again.
Does anyone recognize how this is a much better explanation of our recent economic history, like the housing bubble, the tech bubble, and the S&L crisis, than the standard Keynesian explanation of "deficient demand?" The classical explanation matches up perfectly with our recent experience of housing being overproduced and overpriced whereas the Keynesian explanation fails to even recognize this fact.
Ludwig von Mises, the 20th century Austrian economist, explained how such a mismatch between supply and demand could occur - by the government intervening in credit markets by supporting the creation of new credit unbacked by savings. Such credit expansion lowers interest rates and makes certain investment projects appear more profitable than they otherwise would be. In such a case, investment in these projects rises until the newly created credit ends up in the hands of consumers, at which point they spend it according to their preferences. This spending then unveils that consumers had really wanted more consumer goods and less investment goods - at which point the consumer goods industries outbid the investment goods industries for intermediate inputs (resources used toward production), causing those investment goods industries to become unprofitable, consequently leading to a collapse of purchasing power and a depression.
Note that the classical and Austrian explanation of depressions is essentially a MICROeconomic explanation, while the Keynesian/monetarist explanation is essentially a MACROeconomic one. The essentials of the classical/Austrian explanation get lost in all of the aggregated macro constructs Keynesians use to "prove" their case - constructs such as GDP, "aggregate demand," "aggregate supply," capital (K), labor (L), etc.
Here is a lecture by Dr. Steven Kates regarding the subject of Say's law and the classical explanation of business cycles:
The good stuff in the lecture starts about half-way in, so be patient while watching. His book, Say's Law and the Keynesian Revolution: How Macroeconomic Theory Lost its Way (http://www.amazon.com/Says-Law-Keynesian-Revolution-Macroeconomic/dp/1848448260/ref=sr_1_2?ie=UTF8&qid=1327170937&sr=8-2) is excellent, I highly recommend it for serious econ nerds.
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Good video laying out the basics of the Austrian theory of the business cycle:
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http://www.zerohedge.com/news/us-unrecovery
wow!
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Thomas Sowell saying that the Fed should be abolished:
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Great thread! *bookmarked*
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Love the last line: "when someone removes the canser, what do you replace it with?" That's an excellent question that totally goes along with everything Ron Paul has said but he hasn't quite said like that.
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Bookmarked and stickied! Thanks guys ;D 8)
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Randall Holcombe, economics professor at Florida State University, debunks the mainstream, mechanical approach to economic growth and offers the Austrian alternative, which focuses on the process of production and entrepreneurship:
Some familiarity with the Solow growth model is helpful when watching the video, but not necessary.
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Wow. Superb work Howard. I should log on here more often! I bought Economics in One Lesson for number 2 son this Christmas. I mentioned to you elsewhere that my stepson got Anthem. But I just wanted to tell you how great this thread is.
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Wow. Superb work Howard. I should log on here more often! I bought Economics in One Lesson for number 2 son this Christmas. I mentioned to you elsewhere that my stepson got Anthem. But I just wanted to tell you how great this thread is.
Thank you! ;D 8)
Economics In One Lesson is a good introductory book, good job raising your kids the right way :P
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Friedman's plucking model shows that the economy never overheats - and thus is an important tool to use against standard Keynesian economics in favor of more rational explanations of the business cycle, like those of the Austrian school.
Here is the article itself: http://economistsview.typepad.com/economistsview/2006/01/new_support_for.html (http://economistsview.typepad.com/economistsview/2006/01/new_support_for.html)
Milton Friedman's "plucking model" is an interesting alternative to the natural rate of output view of the world. The typical view of business cycles is one where the economy varies around a trend value (the trend can vary over time also). Milton Friedman has a different story. In Friedman's model, output moves along a ceiling value, the full employment value, and is occasionally plucked downward through a negative demand shock. [Howard Roark's Commentary: One thing you should learn from my thread is that negative demand shocks are the result of negative supply shocks.]
[...]
One reason I've always liked this paper is that Friedman first wrote it in 1964. He then waited for almost twenty years for new data to arrive and retested his model using only the new data. In macroeconomics, we often encounter a problem in testing theoretical models. We know what the data look like and what facts need to be explained by our models. Is it sensible to build a model to fit the data and then use that data to test it to see if it fits? Of course the model will fit the data, it was built to do so. Friedman avoided that problem since he had no way of knowing if the next twenty years of data would fit the model or not. It did. I was at an SF Fed Conference when he gave the 1993 paper and it was a fun and convincing presentation.
Let me try, within my limited artistic ability, to illustrate further. If you haven't seen a plucking model, here's a graph to illustrate (see Piger and Morley and Kim and Nelson for evidence supporting the plucking model and figures illustrating the plucking and natural rate characterizations of the data). The "plucks" are the deviations of the red line from blue line representing the ceiling/trend:
(http://home.comcast.net/~markthoma/Graphics/pluck.1.19.06.jpg)
Notice that the size of the downturn from the ceiling from a→b (due to the "pluck") is predictive of the size of the upturn from b→c that follows taking account of the slope of the trend. I didn't show it, but in this model the size of the boom, the movement from b→c, does not predict the size of the subsequent contraction. This is the evidence that Friedman originally used to support the plucking model. In a natural rate model, there is no reason to expect such a correlation. Here's an example natural rate model:
(http://home.comcast.net/~markthoma/Graphics/natural.1.19.06.jpg)
Here, the size of the downturn a→b does not predict the size of the subsequent boom b→c. Friedman found the size of a→b predicts b→c supporting the plucking model over the natural rate model.
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Were the Bush deficits the result of the Bush tax cuts - or something else? Let's examine the data:
Federal government spending as a percent of GDP in the 90's:
(http://consortiumnews.com/wp-content/uploads/2011/07/Federal_Spending_1993-2000.jpg)
Bill "The Era of Big Government is over" Clinton:
Federal government spending as a percent of GDP during George W. Bush's term:
(http://consortiumnews.com/wp-content/uploads/2011/07/Federal_Spending_2001-2008.jpg)
Dick "Deficits Don't Matter" Cheney:
(http://2.bp.blogspot.com/-k2bHfdritc8/TbzXDVEhBnI/AAAAAAAAEn8/PP1QjUCNhn4/s1600/129200732277806195.jpg)
So could it be that the Bush deficits weren't the result of tax cuts, but of too much spending?
(http://abriefhistory.org/wp-content/uploads/2011/08/Budget-Deficits-1992-20171.jpg)
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I. THE BROKEN WINDOW
Have you ever witnessed the anger of the good shopkeeper, James B., when his careless son happened to break a square of glass? If you have been present at such a scene, you will most assuredly bear witness to the fact, that every one of the spectators, were there even thirty of them, by common consent apparently, offered the unfortunate owner this invariable consolation - "It is an ill wind that blows nobody good. Everybody must live, and what would become of the glaziers if panes of glass were never broken?"
Now, this form of condolence contains an entire theory, which it will be well to show up in this simple case, seeing that it is precisely the same as that which, unhappily, regulates the greater part of our economical institutions.
Suppose it cost six francs to repair the damage, and you say that the accident brings six francs to the glazier's trade - that it encourages that trade to the amount of six francs - I grant it; I have not a word to say against it; you reason justly. The glazier comes, performs his task, receives his six francs, rubs his hands, and, in his heart, blesses the careless child. All this is that which is seen.
But if, on the other hand, you come to the conclusion, as is too often the case, that it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general will be the result of it, you will oblige me to call out, "Stop there! your theory is confined to that which is seen; it takes no account of that which is not seen."
It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented.
Let us take a view of industry in general, as affected by this circumstance. The window being broken, the glazier's trade is encouraged to the amount of six francs; this is that which is seen. If the window had not been broken, the shoemaker's trade (or some other) would have been encouraged to the amount of six francs; this is that which is not seen.
And if that which is not seen is taken into consideration, because it is a negative fact, as well as that which is seen, because it is a positive fact, it will be understood that neither industry in general, nor the sum total of national labour, is affected, whether windows are broken or not.
Now let us consider James B. himself. In the former supposition, that of the window being broken, he spends six francs, and has neither more nor less than he had before, the enjoyment of a window.
In the second, where we suppose the window not to have been broken, he would have spent six francs on shoes, and would have had at the same time the enjoyment of a pair of shoes and of a window.
Now, as James B. forms a part of society, we must come to the conclusion, that, taking it altogether, and making an estimate of its enjoyments and its labours, it has lost the value of the broken window.
When we arrive at this unexpected conclusion: "Society loses the value of things which are uselessly destroyed;" and we must assent to a maxim which will make the hair of protectionists stand on end - To break, to spoil, to waste, is not to encourage national labour; or, more briefly, "destruction is not profit."
What will you say, Monsieur Industriel -- what will you say, disciples of good M. F. Chamans, who has calculated with so much precision how much trade would gain by the burning of Paris, from the number of houses it would be necessary to rebuild?
I am sorry to disturb these ingenious calculations, as far as their spirit has been introduced into our legislation; but I beg him to begin them again, by taking into the account that which is not seen, and placing it alongside of that which is seen. The reader must take care to remember that there are not two persons only, but three concerned in the little scene which I have submitted to his attention. One of them, James B., represents the consumer, reduced, by an act of destruction, to one enjoyment instead of two. Another under the title of the glazier, shows us the producer, whose trade is encouraged by the accident. The third is the shoemaker (or some other tradesman), whose labour suffers proportionably by the same cause. It is this third person who is always kept in the shade, and who, personating that which is not seen, is a necessary element of the problem. It is he who shows us how absurd it is to think we see a profit in an act of destruction. It is he who will soon teach us that it is not less absurd to see a profit in a restriction, which is, after all, nothing else than a partial destruction. Therefore, if you will only go to the root of all the arguments which are adduced in its favour, all you will find will be the paraphrase of this vulgar saying - What would become of the glaziers, if nobody ever broke windows?
http://bastiat.org/en/twisatwins.html
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Bump
RP is the only candidate with the same wiev on economics...yet he doesnt get the vote because he doesnt want to bomb other countries..shame
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I love this thread
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http://mises.org/daily/3663
we are repeating history. Enjoy.
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good clip... you can see why they wanted to get his opinion off the air.
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Enjoy
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Or Mises vs. Friedman:
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http://www.inflateordie.com/files/Anatomy%20of%20a%20Debt%20Crisis%2003-18-2012.pdf
Enjoy. Long but well worth it.
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http://finance.townhall.com/columnists/bobbeauprez/2012/03/25/the_other_104_million_jobs/page/full
Reality ofwhere we are.
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Thomas Sowell saying that the Fed should be abolished:
awesiome shit
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Howard for Mod--
If we need to replace an existing Mod-- Hugo Chavez should get his walking papers.
seconded!
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This is definitely one of the better lectures I've ever listened to: