Big Frick Dot Com

As Will Rogers once said “Thank God we don’t get all the government we pay for” and I couldn’t agree more.

I am well aware of the extraordinary measures our government and for that matter governments around the world have taken recently in an effort to prop up a global economy that seems to be undergoing chemo-therapy if not already on life support. These cash infusions have reached numbers so large that it is impossible for most mortal men to truly appreciate their scope or eventual long term ramifications. Once the numbers get past eight or nine zeros it just doesn’t matter anymore. The one thing I can get my aging and feeble mind to comprehend is that this is a game changer for everybody. Even people who didn’t know they were in the game. The other epiphany is that the game actually changed years ago without anybody paying any attention to it.

The talking heads have now descended in mass to any outlet willing to give them some mic time to write the obituary for the death of free market capitalism. What most fail to mention is that all the United States government is doing is covering their own tracks for the problems that they have created through the short term thinking of political gain. The rest of the world has been forced to follow suit because of their economic dependence on the U.S. economy. I doubt you will hear any European leader admit openly to that dependence, but the reality is if the US economy gets a tummy ache, the underpants of Europe and the rest of the free world economies are in serious peril. China may have become the world’s largest growth market, but the US consumer and his pocket full of credit cards is what makes the economic wheels go around in every country that has a smoke stack, including China.

Now I am not naive enough to believe that Wall Street and the major banking and insurance institutions don’t have any responsibility in this mess. But their responsibility is far more for malpractice in the misdiagnosis and mistreatment of the patient rather than the disease. The government imposing their mortgage welfare programs into the credit markets without any oversight or foresight into how this would affect real estate prices and overall credit risk is the cigarette to this economic lung tumor. The House and Senate built, decorated, manned and floated this bandwagon down Wall Street and now they are damning anyone who was short sighted enough to jump on. Even Alan Greenspan, who testified before the House and Senate Banking Committees warning of the possible collapse of the credit markets, has been thrown under the bus in an effort to deflect attention. Wall Street’s biggest mistake was in forgetting that the financial expertise of most of the mouth breathers occupying the seats of power in both the House and Senate extends only as far as billable hours and their own political war chests.

But the demise of free market capitalism? I think not. To see the beauty of a self-adjusting free market product you need look no further than your local gas pump. The halls of Congress are still damp with the bitter tears that were publicly shed for the gas guzzling masses. It was like watching sharks in a feeding frenzy to see which Democrat could get to the microphone first to announce how President G.W. Bush and his pals in “Big Oil” were forcing the good, kind people in their home districts to eat their own young so they could afford to put gas in a minivan. Congressional committees were formed and the dastardly CEO’s of the major oil refiners were called to testify. Well, actually they were called to be publicly flogged by our dedicated protectors of the constitution. The companies each of these men represented were making money selling gasoline at high prices. They were selling a lot of gas and making a lot of money. Never mind that they were realizing profit margin percentages below that of most other industries including most of the subsidized agricultural products. Somebody had to be the fall guy and seeing as most of the OPEC ministers would have told Congress to go fly a kite, the oil refiners would have to do.

It was suggested that it might help consumers to eliminate the federal taxes that are imposed on each gallon of gas sold, but this idea was quickly shot down because it was said that it would have no long term affect on the cost of oil. This contention was completely correct but, as is so often the case with Congress, missed the point completely of giving consumers wallets a temporary breather. The panicked discussion progressed with talk of price controls, windfall profits taxes, mandated consumption controls, adjustments to the federal fuel efficiency standards, putting federal controls on oil speculation and on and on and on. In the end however, nothing was done. Not one thing. Nada. Congress took no action to directly affect the cost of oil or the related cost of gasoline and guess what, the price come down. It not only came down, it came down a lot. The national average price for a gallon of self-serve, regular unleaded gas was $2.7785 on October 24, a decline of about 53 cents per gallon in the past two weeks. That is a record decline. How is this possible without government intervention? Simple, it came down for the same reason it went up, supply and demand.

With the entire world afraid of a global recession or possibly even depression, the demand for oil and petroleum based products has declined. You don’t see the OPEC nations holding committee meetings to discuss mandating price increases in the world oil market. What you see is oil producers reducing the amount of oil they pump out of the ground. They understand that the price is substantially determined by how much oil there is in the market versus how much oil people want. Oil speculators have abandoned the commodity in favor of other investment vehicles because they understand the same thing. If oil speculators could control the price before why aren’t they doing it now? I don’t want to be accused of giving any insider trading tips, but as most of the country is heading into the winter heating season look for natural gas prices to go up and the price of two piece swimming suits to come down.

No, oil prices came down and eventually will stabilize and head back upward thanks to free market capitalism. The same free market capitalism that will one day drive the alternative energy market to levels we can only dream of today. The same free market capitalism that will bind it’s wounds, pick itself up, dust itself off and lift itself out if this impending recession. Hopefully a lot wiser and probably with a little more oversight. Politicians are focused on one thing only, remaining a politician. They understand that the American voting public has been instilled with a sense of entitlement that demands a quick ride rather than a steady course. They can’t fix an economy with the nuance and inner workings of which they don’t understand, but they sure can destroy it.