Would it be so bad?

Posted on June 30, 2008 by goesdownbitter

Crude oil briefly rose above a record $143 a barrel before settling back to close at $140 on the NYME. Domestic demand for gasoline has now fallen 2.5% compared to 12 months ago and production has fallen off even more down 3.1%. The price of gasoline is now up 37% in the last 12 months while crude oil has risen 49%. Imports of crude oil have now also dipped slightly off 1% from a year ago.

The European Central Bank indicated today that this Thursday the key interest rate would be raised a quarter point from 4% to 4.25% due to inflation running at 4% and that move would strengthen the euro versus the dollar. It would also make dollar based crude oil more expensive and continue to slow economic growth. The Federal Reserve has to be worried that this hike and any others by August will force them to raise rates as well to counter inflation.

Would it be so bad to keep crushing the dollar’s value and raising the price of energy? The less America consumes, the lower our trade deficit, the less inflation we import from China, the more personal debt can be paid down and the more we can export. Now if we could get the Treasury to quit printing money and Congress to quit spending more than taxes bring in, we just might survive.

Sincerely,

Bitter Hinterlands

Filed under: Economics | Tagged:

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9 Responses to “Would it be so bad?”

  1. Lance, on June 30th, 2008 at 6:33 pm Said:

    Would it be so bad to keep crushing the dollar’s value and raising the price of energy? The less America consumes, the lower our trade deficit, the less inflation we import from China, the more personal debt can be paid down and the more we can export.

    Yes.

    The goal shouldn’t be a great big protectionist society. Allow trade to commence freely and let things go as they will. We shouldn’t be looking to “cut demand”, because this implies the government has to dictate rules to change the economy instead of letting it change freely.

  2. goesdownbitter, on July 1st, 2008 at 3:20 am Said:

    It sounds good on paper Lance, but what if we imported everything we consumed? Is that not a security issue? Are we not in military conflict directly because of crude oil and other raw materials?

    What’s the difference between being a protectionist trade society and being an isolationist military society?

    Commerce does not flow freely because interest rates are artificially set, currency exchange rates are artificially set and governments all over the world subsidize products and commodities, including the U.S.

  3. Lance, on July 1st, 2008 at 6:22 am Said:

    It’s doubtful we’d have such an awful trade balance if we had a true free market. However, importing everything we consumed is not a security issue. Japan imports almost everything they consume. They aren’t threatening anyone, so no one seeks to put sanctions on them. The only way for human civilization to grow and become more prosperous is by free trade and imports and exports. If you simply “protect” inside Ameirca’s borders and don’t import, we’re not only preventing Americans from more efficient and cheaper products, but the rest of the world suffers too.

    We are in military conflict because of crude oil right now, but if our military bases were not in Iraq and Afghanistan and 128 other countries and instead was in America, no one would have a reason to “cut off our oil” or anything of the sort.

    Ludwig von Mises wrote that,

    The slogan Away with foreign goods! would lead us, if we accepted all its implications, to abolish the division of labor altogether. For the principle that makes the international division of labor seem advantageous is precisely the principle which recommends division of labor in any circumstances

    It’s true. If you say you can’t buy from China, why can’t we ban buying goods from Kentucky to California? If protectionism is good, then it’s good for the Kentuckyians!

    I do agree with your last statement.

  4. goesdownbitter, on July 4th, 2008 at 12:18 pm Said:

    Oil keeps going up.

  5. Jack Danel, on July 10th, 2008 at 8:05 am Said:

    “Oil keeps going up.”

    Maybe not. Maybe it is the dollar that keeps losing value because of “government spending.”

    All those who bitch about government spending seem to avoid the elephant in the room: the catastrophic spending on Bush’s optional war, paid for by borrowing from China.

    That is precisely the main cause of our current fix and we seem intent on making it worse.

    Continuing down this path is national economic suicide.

  6. Lance, on July 10th, 2008 at 8:06 am Said:

    Jack: All those who bitch about government spending seem to avoid the elephant in the room: the catastrophic spending on Bush’s optional war, paid for by borrowing from China.

    Couldn’t have identified that part of the problem better.

  7. Mike O, on July 10th, 2008 at 8:44 am Said:

    The Iraq war spending doesn’t help but it isn’t the elephant in the room; entitlements are.
    On top of that, the war spending will end, the growth in entitlements will not. Social Security and Medicare is what’ll crush the economy

  8. Lance, on July 10th, 2008 at 8:51 am Said:

    Mike, the entitlements can’t be ended immediately (as much as I am against them).

    The war can be.

  9. Quit whining about the economy and get back to work « The Political Inquirer, on July 11th, 2008 at 7:20 am Said:

    [...] Quit whining about the economy and get back to work Posted on July 11, 2008 by goesdownbitter This is a response to the thread on “Would it be so bad? [...]

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