Posted by Jonathan Kovaciny on 02/12/10

Bigger Oil

From Coyote Blog and FT.com:

"Big" and "oil" are mentioned so often in the same breath that it is easy to lose perspective. Motorists and environmentalists never tire of berating the dominant supermajors whose petrol stations and share listings make them the public face of the industry, their favourite target being America's ExxonMobil. If market value were the sole magnet for opprobrium then Exxon's executives could breathe a bit easier because PetroChina recently overtook it as the world's most valuable listed energy company.

But there is "Big Oil" - last year, Royal Dutch Shell earned more than $1bn a month - and then there is bigger oil. No oil major is able to affect energy prices on its own and even Exxon is far smaller than the world's largest energy company. It is not even close. Saudi Aramco's estimated hydrocarbon reserves of 300,000 million barrels of oil equivalent make it 15 times Exxon's size. Exxon comes in about 17th place, with the top 10 being entirely state-owned.

US oil company executives routinely get pulled in front of Congress to defend themselves against charges they are manipulating world oil prices. Huh? It would be as rational to accuse Grinnell College of manipulating national tuition rates. Americans can take comfort in the fact that by limiting their ability to seek new oil in the US, we have made sure that oil markets are not controlled by evil publicly traded companies like Exxon and Shell but instead are controlled by entirely more trustworthy entities like the governments of Iran, Saudi Ariabia, Venezuela, Russia, Nigeria, and China.

This chart also supports the one good argument I think there is for peak oil - that most of the world's oil reserves are controlled by patently incompetent institutions (e.g. governments) that have very bad incentives that make them highly unlikely to invest well. The only reason these countries are able to produce at all is because western companies are stupid enough to keep walking into this cycle:

1. US companies invest huge amounts of capital and know-how to build oil industry
2. Once things are producing, local government steals it all (they call it "nationalization")
3. Oil fields go into extended decline due to short-term focused and incompetent government management
4. US companies invited back int to invest huge amounts of know-how and capital
5. repeat

Posted 02/14/10 Willij4lib Monroe, WA

Now all we have to do is attach all the faces that go with this and how many of those are in the banking industry and connect the rest of the Dots and all the criminals involved. I wonder how much war is involved in this effort? How much Power and corruption is involved in this? I am sure people like Maurice Strong or Rockefeller’s or the Rothschild’s wouldn’t want their pictures posted up in connection now would they? Just to name a few who would possibly prosper from such activities. Who is looking for global power anyway? Who are the puppeteers who pull the purse strings anyway?

Posted by Jonathan Kovaciny on 01/23/10

My local paper recently published the following Letter to the Editor:

Your View: Republicans counting on forgetful electorate

Few political myths are more assiduously cultivated than the claim that Republicans are good for the economy. The lost decade of George W. Bush conclusively refutes that fiction, with its record bankruptcies, foreclosures, market collapse and towering under/unemployment.

It is the only decade in our history, reported The Washington Post, when not a single net new job was created. Because of Bush's "reverse Robin Hood," trickleup policies, middle income households had a lower net worth and made less at the end of the decade (inflation adjusted) than they did in 1999.

Over Bush's eight years, the Republicans financed three tax cuts, two wars and a $1 trillion prescription drug bill entirely through deficit spending, running up $5 trillion of debt. As Sen. Orrin Hatch recently declared, "It was standard practice not to pay for things."

Bush's presidency ended with an economic crisis and a $700 billion bank bailout that bequeathed Obama $1.2 trillion more debt.

House Republicans, proving that they have learned nothing and forgotten nothing since the Depression policies of Herbert Hoover, voted unanimously for a budget freeze as a solution.

Their other model is Ronald Reagan, who thought tax cuts were a miracle free lunch that, coupled with deregulation, paid for themselves. Republican orthodoxy repeats the free lunch myth but ignores the half-dozen tax increases Reagan passed, including TEFRA, the largest tax increase in history, and his $3 trillion in additional debt.

Despite the spectacular failure of their deregulatory and borrow-and-spend policies, Republicans hope that bafflegab and corporate money can sell their crony capitalism to the rubes again in 2010.

Their only hope is that voters have learned nothing and forgotten everything.

I replied to the editor with the following, which was published a few days ago:

Your View: Government interventions hurt economy

In his Your View, published Jan. 10, Tom Maertens asserts that Republicans, especially Bush, were bad for the economy. I agree with him on that point, but the problem is unprincipled Republicans, not Republican principles.

As such, both parties are to blame: Democrats tax and spend, Republicans borrow and spend, and, thanks to their sugar-daddy Federal Reserve, both parties print and spend. This is an unsustainable course.

At least the Democrats are candid about their desire to grow government; many Republican office-holders are duplicitous. I'd like Bush and our past Republican Congress to explain how exactly the prescription drug expansion and various bailouts and "stimulus" programs fit into the Republican Party platform and their lip service to free-market principles.

If Republican voters are smart enough to stop nominating, electing, and re-electing bad Republicans, we might actually get some good, principled Republicans, as well as enthusiastic volunteers, committed donors, and voters who aren't embarrassed to admit their party affiliation. In the long term, straight-ticket Republican voters have done more damage to the Republican Party than the Democrats.

Decades of market-distorting actions by Congress, along with the Fed's artificially low interest rates, inflated the dot-com and housing bubbles and culminated in a crash. Our current Congress and Administration are furiously attempting to re-inflate the bubble, but we're pretty well out of soap.

We are repeating the actions of Hoover and Roosevelt that turned the Crash of 1929 (itself a Fed-fueled bubble) into the Great Depression.

Left alone, the market will deal with problems and recover rapidly, as it did during the severe yet short-lived Depression of 1920-21. Instead, our government persists in reverse-Darwinist actions that prolong our suffering.

It turns out that Republicans don't think too much of public self-criticism by members of their own party. At my county's monthly GOP meeting (which fell the night my letter was published), I received a tongue-lashing from a local GOP state legislator for the letter, who was aghast that I dared to call George Bush an unprincipled man. The next day, I got a Facebook message from a local party member asking me to leave the GOP, and an email from the GOP District Chair asking to talk to me in person about the letter because he had gotten a number of calls of concern from party activists in the district.

How exactly does the GOP plan to hold on to its principles if it never actually tries to hold on to them?

Posted 01/24/10 anti republocrat Rochester, MN

Jonathan, maybe you actually do belong somewhere other than the Republican Party. The Republicans and Democrats are pretty much the same on the most important issues -- an interventionist foreign policy, military spending, pay to play, allowing corporations to become too big to fail then bailing them out, civil liberties, allowing the Federal Government to interfere in what should be state/local issues such as health insurance and education (NCLB and Obama's coercive race to the top). There's a lot of discontent on the left (and for that matter in the center) with Obama and the Democrats. We need a coalition party centered around anti-corporatism, devolution of Federal power and electoral reform.

Posted 01/25/10 Eric M Johnson Lakeland, MN

"We need a coalition party centered around anti-corporatism, devolution of Federal power and electoral reform." I would want this coalition party to have as a basic principle the defense of individual liberty. If we can't succeed in converting the Republican Party to a limited government, free market political party, then we certainly need to consider creating a new party that will put the Republican Party out of business so that voters have a REAL choice. Democrats and their socialism or the new party that stands for small government and personal freedom.

Posted 01/26/10 daveman Maplewood, MN

Well Said Jonathan! We need to work and continue to hijack (or simply bring back) true principled republicanism. We have been missing that for decades. I do firmly believe that working inside one party has better odds than starting over and think we should continue with that route. It takes time. Socialism/Fascism in America did not happen over night. It was long and slow systematic additions of govt into the peoples lives (sometimes faster than others...FDR...Wilson...). We need to work the opposite direction and keep the politicians accountable so that they follow through. Keep up the great work!!!

Posted 02/15/10 G Anderson St. Paul, MN

Republicans have never been anti-corporatism, but I think we ought to push it as part of the platform. There needs to be a separation of government and economy that is on par with the separation of church and state. In my book, Life, Liberty, and the Pursuit of Happiness, Version 4.0, I suggested an amendment to the Constitution or laws that would read, "Congress shall not establish and business, nor prevent the free exercise thereof.

Posted 02/28/10 Alyssa Kay Brainerd, MN

Hold strong to your convictions. If you feel it is your place to try to bring about some modesty and remorse in those who have been hiding behind pride and greed then do so with confidence. Backing down will only make them feel right to discourage you.

Posted by Jonathan Kovaciny on 12/28/09

Government polices to blame for recession

By Marcus Piepho, Mankato

We find ourselves in a recession with high unemployment and massive debt. In order to understand how we got into this mess we need to look at the Austrian theory of the business cycle.

In a true free market, which America doesn't have, the interest rate is determined by the supply and demand for capital. Individuals choose to consume or invest, and this dictates the amount of loanable funds which businesses will use to undertake projects to bring goods to market for future consumption.

In this country we have a central bank, the Federal Reserve. The Fed prints money, artificially lowering the interest rate and expands the loanable pool of funds, leaves producers with a false price signal. The interest rate will tell producers that consumers want them to undertake long-term projects to bring goods to market. This artificially lowered rate will also induce consumers to save less and spend and borrow more.

The conflicting actions of consumers and producers in response to the government distorted price signal of the interest rate causes the mass misallocation of resources. This leads to the bust.

Logically, the government should stay out of the market and let the malinvestments liquidate, let the market correct the imbalances and distortions created during the artificial boom. Instead the government has undertaken programs to keep people in homes and cars that they cannot afford, bailed out failing enterprises, created make-work politically oriented, and wasteful public works projects, and increased the money supply at an alarming rate. These policies prevent any recovery.

History is repeating itself, with Bush and now Obama following Hoover and FDR's favorite anti-depression prescriptions.

 

Posted by Jonathan Kovaciny on 12/13/09
Last updated 12/13/09

I recently submitted a letter to the editor of my local paper about H.R.1207 and S.604 and it is published in today's paper:

I strongly urge our senators, Al Franken and Amy Klobuchar, to follow the lead of Rep. Tim Walz in co-sponsoring a bill requiring more transparency for the Federal Reserve, our nation's central bank.

The Fed, under chairman Ben Bernanke, played a significant role in engineering and executing the bailouts. Hundreds of billions of dollars were created and doled out to various banks, financial firms, and even foreign central banks, yet we have no legal way of seeing who or how much. The Fed also creates new money to secretly purchase assets on the open market.

This remarkable power is not something that one would expect to find in a representative government; indeed, the Federal Reserve is technically not part of government but rather a private banking cartel given special powers by Congress in 1913, under pressure from the banking industry. In its 96-year history, the Federal Reserve has never been subjected to a full audit of its operations.

Last May, Walz co-sponsored H.R. 1207, the Federal Reserve Transparency Act of 2009. Since that time, support for the bill has grown to include 73 percent of the House. A recent Rasmussen poll found that 79 percent of Americans support a full audit. It is time for Franken and Klobuchar to co-sponsor the Senate version of the bill, S. 604.

Among the Fed's stated goals are economic and monetary stability. Under the Fed, we've endured more than a dozen recessions and the Great Depression, and today's dollar has less than a 20th of a 1913 dollar's purchasing power. For an institution with so much unchecked power and such a dismal record, transparency is a must.

Posted by Jonathan Kovaciny on 11/09/09

This video is well done and worth a watch. What do you think of it?