Tuesday, March 6, 2012
- Don't Blame The Speculators Part: 91,887,545
If you’re examining the long line of economically illiterate politicians, by the time you get to Bernie Sanders, most of the line is behind you. It’s tough to find someone less connected with economic reality. Maxine Waters may be crazier, and Obama may be more directly dishonest. But no one is more clueless about how the world really works than the socialist from Vermont.
Most people know that about him – even most of the people who vote for him. So I didn’t get too worked up when I saw him on TV this afternoon demanding that ‘speculators’ be punished for “driving up gas prices”. He’s a dimwit, and most people know it. So it’s no sense getting overly upset.
Still, I thought I’d run through the role that speculators REALLY play in the markets one more time for those who are looking for the right words to correct their co-workers around the water cooler.
Speculators drive the price up and down – depending on what they think the future holds. If the Administration spends much of it's time canceling drilling permits, denying pipelines, suing oil companies, threatening more regulation for the oil industry, and lobbying for punitive taxes on them while throwing billions in subsidies at their competition, then the forward prospects will point to lower oil production and higher oil prices. The markets will react objectively, and speculators are a sizable portion of the market.
But if the administration were to enact laws preventing nuisance enviro-lawsuits, diminish the arbitrary and unchecked nature of the EPA, increase the availability of drilling rights, remove bureaucratic barriers to production and refining, and generally encourage the production of oil, then the forward prospects would point to increased supply - which as we all know will cause prices to fall. In that circumstance, speculators will drive oil prices down – just as they have recently with natural gas.
Speculators are the market, and the market is the bathroom scale. Bernie Sanders doesn’t like what his bathroom scale says so he wants to pass a law stating that he weighs about 30 pounds less than he really does. But that won't make him any skinnier. In other words, when politicians complain about speculators, what they’re really complaining about is that the results of their actions (not the intentions but the results) are being judged by an objective standard. They hate that, and liberal politicians REALLY hate it.
I know it’s boring to read it again. It’s boring to write it again. But please tell your liberal co-workers not to blame the speculators simply because they see a future that liberals don’t like. There are consequences to policy actions whether you like it or not. And the speculators are just calling it like they see it.