I began my April 3rd post with these words: “Numbers are detached, ruthless arbiters.” After spending some time on the merciless spankings Barry’s budget proposals have received on Capitol Hill (97-0 in Dingy Harry Reid’s Senate, 414-0 in the people’s House, and so forth), and on how whole numbers adding up to nine hold the potential to make him look an even bigger fool, I went on to state: “I will save the “iron triangle” of gasoline prices, CPI, and unemployment for future posts.”
Now seems like a good time to take a swing at it.
Gasoline prices are affected by a myriad of factors in the global oil commodities market. An awful lot completely beyond Barry’s control, as well as much resulting from Barry’s failed governance, points in only one direction … more and more expensive gasoline at the pump.
Everything … and I mean everything … contributing to the Consumer Price Index (CPI), the official measure of what you, dear reader, need to pony up just to live, is affected by the price of a barrel of oil. The cost incurred by manufacturers and distributors to stock those shelves at the local supermarket is built directly into the price of all that stuff. The manufacturers of this stuff use equipment powered by the products of a barrel of oil, and package the stuff in plastics made directly from the products of a barrel of oil. (side note: LAS often wonders how his life might have been different if he had received the benefit of an investment advisor this erudite … usually when I scan my household taking note of all the plastic crap strewn around it)
Of course, all that supermarket stuff has to get from the manufacturer to the shelves somehow. This is accomplished by planes, trains, and trucks running on a particular product refined directly from a barrel of oil - gasoline. And if you are lucky enough to have a paying job in Barry’s dysconomy, you are likely burning the suddenly more expensive gasoline to commute there and back (whether it’s your personal vehicle or the price of the bus or train ticket passed on to you either directly or thru taxes to cover the losses of the public transit authority). Which, of course, means you have less pay left over to cover the now suddenly more expensive stuff at the supermarket. Feeling squeezed yet?
For the third leg of Barry’s iron triangle of economic fail, I need to refine my original thoughts. “Unemployment” doesn’t quite capture it, because the official measure everyone talks about is so misunderstood. The best thing to do with a number you want to be low, but can go down when things are getting worse (due to discouraged workers leaving the work force), and go up when things are getting better (previously discouraged workers re-entering a growth economy in its early stages) … is to just ignore it as Orwellian.
The third leg of the vise really comes down to economic growth. A growing economy produces the need for hiring. It’s that simple.
The free market naturally operates in boom and bust cycles.
Bust times, left alone, are very efficient at quickly squeezing out bad ideas, business models, et cetera. Gub’ment bailout policies such as TARP and the effective nationalization of the auto industry, and so forth, allow the bad to hang on and survive thru to the next cycle.
Boom times, left alone, allow a fresh wave of ingenuity and innovation to quickly replace losses with new gains produced by better ideas and business models. When gub’ment indulges in the policies of micromanaging businesses – burdensome regulations, actual taxes, the threat of taxes, the threat/promise to add costs nobody understands hidden inside 2700 page bills – the recovery is naturally stunted.
Now you know why Barry is presiding over the slowest technical recovery since the Great Depression. (You might even understand how FDR kept the Great Depression going for so damn long)
So, I’ve chosen to label the third leg “UnGrowth” … as a sarcastic nod to the technical truth Barry’s dysconomy is now in a phase of technically measurable, but anemic, growth – with an invented term inspired by Orwell’s Newspeak language from the novel 1984 (which is a good template for exploring Barry’s totalitarian instincts, but we’ll save that one for another time).
In Barry’s dysconomy of UnGrowth, employers are reluctant to release capital to hire new employees or give raises to existing employees, because the risks outweigh the perceived rewards. So, dear reader, the source of the capital you need to purchase all that suddenly more expensive stuff, burning all that suddenly more expensive fuel to get from point A to B, is artificially blocked by gub’ment policies. That’s the iron triangle of economic scarcity that is squeezing on your head.
You can and should blame the policies of the Empty Suit Known as Barack Hussein Obama and his Corrupt Gang of Progressives for this vise pressing on your standard of living.
With regard to energy policy they are out on the trail telling you half-truths and outright lies, because they assume you know nothing of the immutable laws of supply and demand. (Or maybe it’s they who don’t understand these things, as they are acolytes of Marx rather Smith)
Oil is a global commodity. Global demand is going up, up, up – driven by eastern growth economies like China’s and India’s. Somebody has to increase supply to meet the demand, or the price of a barrel has nowhere to go but up.
When Barry tells you the production of supply in this country is up, he is disingenuously telling you a half-truth. Production is up on the private lands owned by those evil capitalists seeing opportunity in the production of supply to meet rising demand. Production is down – way down – on the public lands controlled by BHO and His Corrupt Gang of Progressives. This will remain true as long as they are in office because they are slaves to their Leftist ideology, which informs them throwing public money down the rat hole of an endless parade of ‘green energy’ crony socialist bankruptcies is a smarter investment. When he tells you these 'green' technologies will be ready for economic prime time on a timeline any shorter than decades, he is lying through his teeth and should know it.
And even if they turned on a dime and embraced the ‘Drill Here, Drill Now’ game plan – which they won’t for ideological reasons – they would be trapped by one of their own tired old memes. Every time ‘Drill Here, Drill Now’ has come up over the past several decades the Leftist hue and cry rises … “but it takes years for the product of a new well to reach market.’ Yep, that’s right, Barry – and you only have six months before election day.
But what of the other producers across the globe?
Can Barry’s good friend Hugo Chavez make up the difference? No, he’s too small a producer. George Soros will turn a tidy profit off this arrangement, but it will be a drop in the bucket in the overall global supply & demand balance.
Can the oil producing dictatorships of the Middle East make up the difference? Maybe. Will they? Definitely not. Thanks to Barry and Hillary’s naïve foreign policies, the Mideast is now in a state of chaotic uncertainty. Former ally Egypt is now being run by the Muslim Brotherhood, which has forsaken the peace treaty with Israel, and using the Sinai as a launching pad for terrorist rocket attacks. Even odds Israeli tanks will be rolling through the Sinai before our election day.
And, of course, we know Barry extended his open hand to the Iranian regime, only to have it cut off with extreme prejudice. Odds strongly favor Israel having no choice but to attack Iran’s nuclear weapons program before our election day.
Producers of global commodities really don’t like it when bombs are bursting all around their investments. It makes them nervous and they protect what they can while inevitably producing less.
LAS makes a prediction, knowing the summer driving season stands at our doorstep. Gasoline at the pump will be priced at the psychologically devastating $5 per gallon mark on election day. And there is nothing you can do about it, Barry.
As previously explained, every citizen of the republic will not only feel the pain at the pump, but also the related relentless rise in the price of everything. And Barry’s policies will prevent the economy from growing at anything close to what’s necessary to alleviate all of this. Bad news for your re-election prospects, Barry - very bad news.
I think I’ll save the wonky charts for a follow-up post. The weather is beautiful on this Easter Sunday, the Master’s is in the fourth round, on television, and Phil Mickelson is playing in the final group sitting on a pretty good golf number (-8) after three rounds of competition.
Update 8 pm
Well, if it couldn't be Phil's fourth green jacket, I'm glad it could be Bubba's first. The ugly triple bogey on #4 proved the difference. Sitting Presidents with little to no economic growth after adding five trillion bucks to the national debt should take note.
And so it begins ...
The most noteworthy line in this analysis is "the U.S. has half the number of refineries it did in 1980." In view of this, and the Keystone Pipeline story, LAS recommends updating "Drill, Baby, Drill" to "Drill, Distribute, Refine!" Although I can see how that might not be as catchy on a bumper sticker ...