It seems that American statists are conjuring up new scapegoats for America’s economic woes, what with speculators, oil companies, and OPEC becoming the new national boogeymen. I suppose this was inevitable given that it might be difficult to blame ever-rising gasoline prices at the pump on illegal aliens.
First, though—a little personal history on this subject:
Three-and-a-half years ago — December 27, 2004 — I wrote an article entitled “The Federal Attack on the Dollar” in which I stated in part:
“In effect, Washington officials are doing what imperial powers have done throughout history — debasing the currency to finance massive military and welfare expenditures. The consequence will inevitably be ever-increasing prices, which is simply the market’s way of saying that the currency is falling in value in comparison with everything else. The advantage to public officials, obviously, is that the masses usually have no idea that government is behind the rising prices and so join the government’s chorus blaming the rising prices on rapacious businessmen, profiteers, and speculators.”
In August 2006, I wrote an article entitled “The Federal War on Gold,” in which I stated in part:
“When prices of commodities, goods, and services start rising in response to the depreciating quality of the money, the average person is likely to blame those in the private sector, such as oil companies, speculators, and businessmen, for the woes.”
On November 27, 2006, I wrote a blog entry that stated in part:
“If out-of-control federal expenditures do produce a monetary crisis, here’s my prediction: Just like with Iraq, where no federal official is accepting responsibility for the debacle, it will be the same with a dollar crisis. Federal officials will claim that the fault lies with such scapegoats as speculators, entrepreneurs, big oil, big business, OPEC, and perhaps even illegal aliens.”
Just as I have been predicted for the past several years, today we have two presidential candidates—John McCain and Barack Obama, as well as many of their statist friends — blaming rising fuel prices on OPEC, oil companies, and speculators.
“I believe there needs to be a thorough and complete investigation of speculators to find out whether speculation has been going on and, if so, how much it has affected the price of a barrel of oil.”—John McCain
“For the past years, our energy policy in this country has been simply to let the special interests have their way — opening up loopholes for the oil companies and speculators so that they could reap record profits while the rest of us pay four dollars a gallon.” —Barack Obama
Of course, both McCain and Obama are sadly misguided. The problem is not with the speculators, it’s with the federal government, including Congress, where both McCain and Obama have been serving for many years. As I’ve been pointing out for the past several years, the problem is out-of-control federal spending, which has brought about a crashing of the dollar, which is reflected in rising prices not only for oil and gas but also for other commodities, including foods and precious metals. But of course, when was the last time you saw a government official take individual responsibility for his actions?
The speculator, in fact, plays a very important and beneficial role in a free market. For one thing, he helps protect both sellers and buyers against big unforeseen price changes. For example, suppose a farmer is getting ready to plant his soybean crops, when the price is $10 a barrel. A speculator, believing that soybean prices are going to soar, will commit to buy the farmer’s soybean production in advance for $10 a barrel. The speculator, not the farmer, takes the risk on future price fluctuations.
Moreover, the speculator’s actions send market signals to people about available supplies of an item. If the speculator is buying up a particular item, his actions will tend to drive up prices. That tells consumers to conserve and producers to produce. Contrariwise, if speculative activity drives prices down, it tells consumers to consume liberally and producers to shift production into other items.
Here are three great articles that explain the beneficial role in a free market played by speculators — and how speculators have historically been reviled for their free-market activity:
The Speculator as Hero (1993) by Victor Niederoffer;
Bless the Speculator by John Stossel;
Greedy Speculators? by Richard Rahn.
Of course, it’s not surprising that as two major proponents of the welfare-warfare state that has saddled Americans with ever-growing big government and big spending, both McCain and Obama do what profligate government officials have done for centuries: look for scapegoats in the private sector on which to blame the nation’s economic woes.
We can only hope that Americans come to see that the root cause of their economic crises lies not with the terrorists, the communists, the Muslims, the Islamo-fascists, drug lords, oil companies, OPEC, illegal aliens, or speculators. The responsibility for the economic mess in which our nation is mired lies in Washington, D.C., and specifically in the out-of-control federal spending used to fund both the welfare state and the warfare state.
Don’t look to McCain—or for that matter to Obama—to remind people about how Ronald Reagan brought down the Soviet Empire—by causing the Soviet government to spend the nation into bankruptcy. The point now uncomfortably hits a bit too close to home, given that that is precisely what the U.S. government is doing to our nation.