Miscellany: 3/12/12

Quote of the Day

Ninety-nine percent of the discoveries are made by 1 percent of the scientists.
Julius Axelrod

Oil Prices and the Dollar

Over the weekend I posted a tongue-in-cheek Youtube video on gas prices from Omid Malekan; Malekan is a former trader, now involved in real estate; he is a free market, Fed Reserve critic like myself and became a Youtube sensation with an earlier animated short over quantitative easing. Among other things, Malekan in the video specifically raises the devaluation of the dollar as part of the underlying story (and shows a parallel between oil prices and stock market prices)--with the obvious takeaway being the Fed's easy money policy and Fed Reserve chief Bernanke's own reference to the effect of monetary policy on stock market valuations.

MJ Perry of Carpe Diem just published a post showing a lineplots of the prices of Texas and European crude against the US dollar, Japanese yen, and the Swiss franc. The bottom line: West Texas crude is up almost 31% in dollar terms but half that or less against the franc and yen respectively; for Brent crude, the cost per barrel is up 56% against the dollar, 38% vs. the franc and 35% against the yen.

Louis Woodhill wrote a recent related Forbes post where he feels, based on barrel vs. gold prices, oil prices are only 82% of the amount commensurate with long-term gold/barrel ratios. He worries (as do I) of politicians sorely tempted to engage in counterproductive policy mischief like expanding the payroll tax cut (which further eats away at social security reserves) and punitive oil company taxes (the very last thing we need is to lower the incentive for further domestic development; restrictions on domestic production would exacerbate the global oil squeeze). Higher energy costs on consumers take away from discretionary income, with an obvious implication for the rest of the economy.  Woodhill frets about stagflation--that once-considered impossible situation of both high inflation and high unemployment (or falling economic growth) vs. the so-called Phillip curve (Keynesians had always been happy with some inflation, but Edmund Phelps won the Nobel Prize for showing no long-term relationship between inflation and unemployment and introducing the concept of the natural rate of unemployment.)

We have heard quite a bit about stagflation in the press over the past year, e.g.,

• Ronald McKinnon,WSJ, "The Return of Stagflation: We enter the summer of 2011 facing an ugly combination of inflation and high unemployment. Blame the Federal Reserve", May 2011
• David Oakley and Peter Garnham, "Strategists warn of stagflation threat", Financial Times, Jan. 2011
• Panos Mourdoukoutas, "China is heading for Stagflation", Forbes, Dec. 2011

The real implication of no long-term trade-off suggests that fiscal remedies (like massive stimulus bills) are ultimately futile: "A group of renowned economists, steered by Milton Friedman established the idea that the failure of the relationship called for a return to non-interventionist, free market policies."

Corbett's Video Rant on TSA Nude Image Scanners

In my March 7 post, I had briefly referenced Corbett's crusade against the scanners in a more generalized brief rant about how cash-strapped operatives often adapt to sophisticated federal boondoggle systems with inexpensive decoys. I haven't flown for a couple of years, so I haven't gone through the new regimen. But the very first thing that came to mind when I saw this video is: why aren't they using a layered approach, i.e., retaining the old metal detectors? Why are they resorting to and/or dependent on more subjective criteria involving visual detection versus more objective detection technologies? Why would they invest in a technology that an Israeli security chief publicly pans and says that he could easily work around to bring down a Boeing 747?

I personally would tone down the rhetoric a bit here: I don't think the intent of the TSA is to molest people; they honestly believe that they are simply following orders, even if they're violating the intent and spirit of our Bill of Rights and undermining the very essence of liberty.

But what really does bother me as much, if not more, that the federal government not only has failed to provide probable cause to a presumptive unwarranted search of our persons is:

• the fact that our fellow citizens have been manipulated by politicians of both parties utilizing a Politics of Fear, way out of proportion to the risk. The worst incidents we saw over decades were occasional hijackings. There was no evidence AT ALL incidents being initiated by ill, elderly or very young people, families or sports teams, or regular travelers. All incidents to date have involved foreign-born or resident radicalized members of one particular religion. (Does that mean we can rule others whom don't fit the profile out? No. Obviously a motivated terrorist recruiter would want to woo someone whom doesn't fit the standard profile.) 
• We see fellow Americans willing to sell out both THEIR liberty and OUR liberty for a false sense of security (because we know from various testing probes that at least 10-15% of planted violations are never detected). They do it based on the basis of a single set of attacks over several decades. Our children are far more likely to die in a school bus or other vehicle mishap than a plane crash, but we see no comparable safety regimen. Not only did those tragic crimes against humanity result in a whole new ultra-expensive, ineffective bureaucracy but ultimately two major foreign interventions costing thousands more than the number of original 9/11 victims and probably $1T or more over the past decade. The same government which failed to prevent 9/11 just a few years after Al Qaeda declared war on us is trusted to get policy right this time around.

Barriers to Entry: Stossel's "Illegal Everything"

John Stossel in this segment looks at the redtape in opening my favorite prototype young people's business--a lemonade stand--and a taxicab. Clearly the bureaucracy is out of control--classes to take, fire extinguishers, permits, etc. (And notice how there are two policemen warily keeping an eye on Stossel--just in case, of course, someone actually tries to drink Stossel's lemonade. Since when is this sort of thing a priority?)

Then there's the question of Washington DC trying to implement a medallion system for taxicabs (like in NYC, where they go for about a million bucks each), all under misleading spin from Big Taxis, which do not like the competition from entrepreneur taxicabs cutting into their business. Does anyone really think that the lobbyist making hundreds per hour is out to ensure there you have a readily available, eager driver whom works for himself and wants your business for a competitive price--or some suit who assures you that the public is willing to pay whatever the market will bear--for a smaller number of "well-qualified, professional" cabbies?

Notice how the elitist councilman seems flustered that Stossel would even question what government does--why, government regulates,of course! Why exactly the councilman is pushing on this string is unclear: a flood of complaints about cabbies not knowing directions, being personally abusive, or running up the tab? Or is it more like "we're not doing our job if we're not regulating someone or something:" Regulation for its own sake. After all, we're a world-class city, just like NYC! If they have medallion cabs, why surely our city is worthy of the same spirit of professionalism!

I had to laugh at the bewildered look on the councilman's face when Stossel asks him if he ever voted to deregulate anything... "Why would I ever do that?"  Hmmmmm. How about to address deadweight loss for the consumer, to improve the nature and extent of related goods and services at better prices? No more government of the bureaucrat, by the bureaucrat and for the bureaucrat!



Musical Interlude: My Favorite Groups

The Cars, "My Best Friend's Girl"