The Oil Situation

EVERYONE AND HIS ASSISTANT are warning us of an imminent shortage of energy, because oil is becoming more expensive. I find myself unconvinced. Presumably, the people in the Middle East have not suddenly decided to start drinking their oil. Are the wells actually dry, or is pumping just getting more expensive? Have the oil-owners really looked around – for instance, in wells that they abandoned a few years, or decades, ago? Have they thought of looking further – perhaps, in the sea off our coasts, or in all those parks full of spotted woodpeckers? Presumably, a subterranean lake of oil can be under water just as easily as under dry land – and under public property just as much as private property.
Also, has anything been done to avoid wasting oil? One use for oil is as motor vehicle fuel, and vehicle fuel is taxed. Therefore we see governments everywhere striving to force fuel consumption up. There are exhaust emission limits which exclude efficient, high-compression engines. Quite often, you will see a highway where most of the traffic is going in one direction, but the number of lanes in that direction is the same as in the other direction.
The fuel tax has a strong tendency to gravitate to the lowest level, the Congress, which is utterly unscrupulous in diverting it to purposes other than maintaining the highways. The fuel tax does not serve the – justifiable – purpose of balancing supply and demand; tolls could well do this, if the drivers knew they could count on the toll being raised or lowered to keep the traffic running fast. The 24/7 tolls which we see today net only trivial sums of money, but create extravagant delays.
Again, it is the rule rather than the exception for states to sell very expensive license plates which give access to any highway at any time – whereas privately-owned car parks charge so much per hour (if the highway did the same, there would be an incentive to save, not waste, time.) Consequently, the state and inter-state highways regularly run freely out in the country, but slow down to their minimum speeds and stall within cities. But intra-city traffic could quite well be sold plates restricted to local, “surface” streets – if county and state governments were prepared to sacrifice part of their revenues from fuel and license taxes.
Nowadays, a great deal of oil is burned in the heating systems of buildings; if the vehicle fuel tax were eliminated, the vehicle operators could quickly bid the oil away from the building occupants – who could easily burn low-density propane or another natural gas. Once again, it is government policies which are creating the appearance of a scarcity.
This conclusion should not be news to any American. For what purpose did the states create the Congress, the president? To protect them from “invasion” – a word which, once upon a time, implied armed forces, not unemployed individuals – and “domestic violence.” These are missions that need only an army and a navy – and for which the citizens can well be expected to pay taxes. Yes, the Congress was allowed to claim the territory beyond the boundaries of the several states for itself – but no-one would ever have expected a “popular” government, one which can act by mere majority, to be competent to manage property; any owner of land quickly seeks to share its crops with a farmer.
The historian John Lukacs pointed out, in The Hitler of History, that the very nations that defeated Hitler have now adopted his Fascism, private ownership but public management. (It is, I trust, obvious that this is just the opposite of a system that will actually work, profitably; it is management that is expected to watch what happens every day, and take care to respond quickly and appropriately.)

The Great Greenspan

THE ERSTWHILE CHAIRMAN of the Federal Reserve Bank – which seems to be more national than federal – was interviewed on television recently. Alan Greenspan appears to have benefited very little from his association with Ayn Rand, the philosopher of Objectivism: he seems to think that it is a matter for concern that the rich are many times richer than the poor. Why is it so? How does it matter to me whether Bill Gates is a thousand or a million times better off than I am? That datum is not objective, it is subjective.
What might be worth discussing is, whether you, or he, or I, can rival Bill Gates. Once upon a time, the answer was plain: Henry Ford I started with nothing and ended as the richest man in the world – simply by having Better Ideas. Today, it would be difficult to emulate him.
If you start by working for someone else (as Ford did) you find that wages do not increase sharply with experience and skill, because wages are not determined afresh every day by competition; they are negotiated by labor unions. Because the unions are “democratic,” in the sense of choosing their officers by majority vote, they tend to institute wages that are too high for the many at entry level, too low for the few most competent. Government organizations have the same characteristic, but no-one expects to get rich in government service (at least, so we hope!)
If you try to succeed as a professional, you find that there are paper hoops through which you must jump, often at great expense in money and delay. If you try to make it on your own, you quickly find that you are not on your own at all: you are working for the city, county, state and union tax collectors (if your state does tax transactions, such as incomes or sales.)
In the United States, as constituted, taxes are apportioned according to property (meaning, that if Congress lays a tax on [horseless] carriages, and there is one car[riage] per person in Nevada but one per ten persons in Rhode Island, then the tax on each car[riage] will be ten times higher in Rhode Island than in Nevada.) This means that the people in the poor states would object to taxes just as much as the people in the rich states: it also means that anyone who owns a car[riage] has to see that it makes a profit, or else lose it.
Were it not for taxes on transactions, and all these arbitrary obstacles, a man, or woman, with ability and ambition would be able to storm up the social order, toppling the old fools who are resting on their laurels. If you find that you cannot do that, you need not blame yourself (still less Bill Gates,) you should blame the persons you, or your parents, or your grand-parents, allowed to hold public offices.
Greenspan, who claims to be widely read, made another pathetic blunder: he suggested that the never-sufficiently-to-be-dreaded global warming could be delayed by a “carbon tax” on combustibles. Does he spend his life entirely in his library? Any ordinary man (or, of course, woman) can see the results of today’s taxes on motor vehicle fuel: the highways are managed, and indeed designed, to waste expensive fuel. You see highways where the traffic cannot distribute itself to fill all lanes equally; you see tolls which are the same at peak and off-peak times; you see STOP signs instead of YIELD signs; you see double yellow lines painted so as to keep all vehicles out of some lanes; you see stop-on-red instead of go-on-green signals; in New York, you find that drivers who do not have EZ-pass (commuter) subscriptions are excluded at off-peak times.
And what, may we ask, is done with the money collected in fuel taxes? Seemingly, it is not expended on keeping the bridges in good repair. Or does the ineffable Greenspan not watch television?

WHAT, we may well wonder, does the Federal Reserve Bank imagine it is doing? What we have seen it do was reduce significantly the cost of borrowing currency; this can only mean that more people will borrow more from their banks, there will be more currency in circulation, and prices will go up.
Higher prices, particularly the price of labor, seem to be a Good Thing, perhaps – except that they result in higher taxes. But there is a serious snag. Every business, if not every person, keeps accounts, so as to know whether it is making a profit or a loss. If prices go up between January 1st. and December 31st., then the value of the inventory is over-estimated and the expense of depreciation is under-estimated: the accounts are flattering, businesses that should have been closed remain open. The very point of keeping accounts is to be sure you are not losing money!
One would expect that, after money has been in use for millennia – the Gospels are full of references to money, and paying taxes – problems like this would have been solved. And so they have been! The Constitution, in Article I, Section 10, requires that “No State shall . . . make any thing but gold and silver coin a tender in payment of debts.” If some of the States are keeping accounts in gold, and others in silver, then if new deposits of either metal are discovered and mined and coined, then some of the States will seem to be thriving and others seem to be struggling: people will realize that something unusual is happening.
The States are usually all too eager to tell their citizens what to do with their own land, or buildings, or automobiles, or firearms, but, strange to relate, only three States, Colorado, Missouri, and Nevada, have exercised this power (and they have abused it, by admitting both silver and gold coins!) The result has been “stagflation;” the accounts show profits, but people do not find themselves better off.
` Sooner or later, more and more and more people will realize that the Federal Reserve Accounting Unit Dollar is only currency, and neither a store of value nor a money of account. Thus we must expect that it will follow the example of all other currencies, and degenerate faster and faster and faster . . . .
The price of silver today is $13.80 per ounce, ten times what the fractional silver coins are worth: it can hardly be hoped that Colorado or the other States will, after 150 years, begin to enforce their legal money statutes. However, there is one measure the Congress could take to avoid the utter collapse of the social order; I call it “Currency as Seigniorage.”
The “Double Eagle,” the $20 gold coin, contains 20/20.67 ounces of gold. If Congress mandated that the Treasury deliver a Double Eagle to whomsoever brings into the Mint 20/20.67 ounces of gold and twenty Federal Reserve Accounting Unit Dollars, then today, with gold at $720 per ounce, the seigniorage (the fee claimed by the Mint) would be 20/(720x20/20.67) = 3%. This is just slightly higher than the seigniorage on foreign coins, such as the Krugerrand, but American people would undoubtedly want U. S. coins for presentations and curiosities. However, when gold reaches $1000/oz., the seigniorage would be under 2%, less than that of all other gold coins, and gold from all over the world would come to our Mint. And as gold rises to $2000, $5000, $10,000 . . . there would always be at least one use for Federal Reserve Accounting Unit Dollars; they would never become “not worth a Continental.”
Incidentally, this is not a new idea: I proposed it to the Commission on the Role of Gold in the Monetary System twenty-five years ago. Congress did nothing then, and is doing the same thing now . . . .

9/11 plus Six Years

Do you live in New York? If not, you probably do not know that, last week, four fire-fighters were killed in a building that had been abandoned as too dangerous after the 9/11/200l events.

Yes, you heard aright. First the Twin Towers fell. Then WTC 7 fell – perhaps because the great Giuliani had put his emergency headquarters, complete with generator and a few thousand gallons of diesel, in it. And now we find that two airliners succeeded in destroying, not three but, four fine modern buildings.

Perhaps Giuliani could interrupt his campaigning to enlighten us ignorant tax-payers. What we saw, or were told other people saw, were two airliners full of jet fuel crashing into Towers One and Two roughly half-way up. So, of course, the sprinklers started, and drained all the water stored on top of the towers. Then, naturally, everything flammable in the top half of the buildings was burned. If so, then the weight imposed on the lower part of the building would have been greatly reduced – by the weight of the water and the weight of half the flammables. Why, we should like to know, did the buildings collapse right down to street level, instead of the lowest third remaining upright? And just how did this peculiar vulnerability infect the other two buildings?

When a privately-owned building is damaged, the insurer sends engineers to look at the damage and explain how it occurred, and why (take my word for it – I was one of ‘em.) But when buildings owned by the Port Authority of New York and New Jersey collapse – with numerous fatalities – no-one, apparently, feels obliged to find an explanation, or even to examine the evidence. Six years later, we still have a yawning crater and, it seems, at least one building that is uninhabitable but – we presume – still paying taxes.