Blind to reality

ABC news reported today that America is experiencing a “perfect storm” of economic troubles. According to the report there are three primary factors at work.

  1. Rising oil prices.
  2. Rising food prices.
  3. Danger of inflation.

The ABC report also implied (though it did not explicitly claim) the solution to these problems is government interference. Which is more than just a little ironic as government interference in our free-market economy is largely responsible for all three elements of this “perfect storm” (This is painfully obvious to anyone who bothers to read even the most basic of economics books — Henry Hazlitt’s “Economics in One Lesson” is a great place to start).

A simple study of economics should include two primary principles:

  1. The laws of supply and demand.
  2. The law of unintended consequences.

Both of these things are at work in this “perfect storm” and any president who understood them could easily solve the problem. Let’s take these issues one-at-a-time:

Rising oil prices

thidoil.jpgThe law of supply and demand tells us that prices increase anytime demand rises or supply drops. In this case both things are happening. Worldwide demand for oil is increasing and oil-producing countries restrict the supply so that they make more money for their oil.

But the United States has a lot of oil fields, too. We could be drilling for crude oil and making our own gasoline — which would increase the world’s supply of oil and drop prices. But we don’t do it.

Why?

Because environmentalists lobby in Washington to prevent us from harvesting our own oil and building new refineries to convert it to gasoline. This artificially limits supply and increases prices. Our own government is largely responsible for the high gas prices.

Rising food prices

The environmentalist answer to rising energy costs is the production of ethanol, a fuel made from corn. The federal government even mandated a certain percentage of America’s corn crop be used in the production of ethanol.

thidcorn.jpgSound like a reasonable solution? Beware the unintended consequences…

Corn is a major player in every aspect of our food supply. It is used to feed dairy cows, beef cows, and chickens. It is used to make corn syrup and corn meal. And, of course, we eat corn ourselves. But if the government forces us to use a portion of our corn crop for the production of ethanol then that limits the supply of corn left over for food. And what happens if supplies drop? That’s right, prices rise. So, once again, we have our federal government to thank for interfering with the market and, because of their ignorance of unintended consequences, bringing about higher food prices.

Danger of inflation

Most people think inflation is rising costs. But rising costs is just a symptom of inflation. Inflation is in increase in the money supply. There once was a time when American currency was tied to precious metals. When that was the case the money was stable. Now, the government can print money by fiat — meaning pretty much out of thin air. When they do that they increase the amount of money in circulation and when there is more of something available it’s value drops — hence the higher costs we associate with inflation.

thidsilverdollar.jpgThe government does this because they get to use the new money first — before it’s had time to get into circulation — so they benefit immediately from the fiat currency. But by the time it gets to average American consumers it’s value has dropped.

So this perfect storm is a direct result of government interference in the market. To think more government manipulation is the cure is lunacy. The only thing the government could do to improve this “perfect storm” of economic problems is remove restrictions on oil harvesting and gasoline production, eliminate mandates for the production of ethanol, and stop printing money out of thin air.

Unfortunately this is unlikely to happen as these steps all require the government to relinquish some power — and governments almost never do that willingly. In fact, the tendency is for the state to acquire more and more power. Ours is not exception (here’s just one example).

Bumper sticker of the day

Joseph Farah, founder of worldnetdaily.com, is fighting this attempt by the government to limit liberty by starting a bumper sticker campaign against it. Here’s the sticker…
w0161.jpg

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About Chip
Chip is a graduate of Ouachita Baptist University in Arkadelphia, AR and Mid-America Baptist Theological Seminary in Memphis, TN. He served more than five years on the staff of the State Convention of Baptists in Indiana as Director of Communications and Public Relations, editor of the Indiana Baptist newsjournal, and regular contributor to the Baptist Press, the official news service of the Southern Baptist Convention. He currently earns his living as a writer. He serves his local church as a teacher and deacon and his local Baptist Association as a Seminary Extension instructor and supply preacher.

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