Think about what happens when the world economy actually starts to recover! We may very well go from high gas prices to super high! In my view this bullish analysis for US gasoline prices argues that the Fed’s easy money program is sowing the seeds for global stagflation.
The law of unintended consequences will surely play a role in undermining the Fed’s attempt to use easy money to reduce unemployment in the US.
The path to higher growth and lower unemployment sounds logical enough when you read the Fed’s reasoning for “QE 3/infinity,” but if we step back for a moment and just think about what the Fed is really saying is that money printing will make the economy healthier. Who really believes that money printing can set in motion a positive self reinforcing cycle of healthy growth? Why are we so gullible?
The law of unintended consequences ALWAYS undermines well intended public policies aimed at guaranteeing certain social or economic outcomes. There is no way for the government to ensure outcomes without at the same time sowing the seeds for invisible second round effects that ultimately undermine the well intended goal. If government could guarantee social or economic or market outcomes, then we would all live in a world without poverty or financial crisis or global warming.
As soon as the government attempts to control or inject certain desire social or economic outcomes into our world, the law of unintended consequences comes into play, thus undermining the best designed and best intended macro policies.
To believe that government can inject favorable outcomes into society and the economy assumes the government can provide free lunches via enlightened policy making.
The law of unintended consequences often results in outcomes that are not just less than hoped for but diametrically opposite of the intended policy. What this means for the Feds “QE to infinity” program is that it very well may result in higher, not lower unemployment levels.
The road to hell is paved with good intentions. Let me clarify what I mean by this. I am not saying that all good intentions go punished. Good intentions are a healthy part of our day to day lives. We should all live according to the golden rule, do unto others as we would like them to do unto us. We should all have a gracious and grateful heart and we should all seek to do good in the world.
The problem comes when we turn to the government to do good on our behalf. The problem comes when we think we can use government to inject positive macro outcomes into the world. There is a fundamental difference between offering a neighbor in need a place to sleep and a warm meal and between the government guaranteeing this for everyone in society. When the government attempts to guarantee equal outcomes and a level playing field and promises to get rid of business cycles thanks to a Central Bank, we should all be circumspect. Why should we believe the government can deliver free lunches. There will always be mysteries that we don’t understand that undermine well intended public policy aimed at guaranteeing such outcomes as “income inequality” or “a level playing field” or “universal healthcare” or “sustainable growth” or “world peace.” IN each of these cases, the government must use an ends justifies the means approach which automatically undermines the intended positive outcome. For example, there is the argument that we need to use military force to deliver peace to the world. The same sort of might-makes-right logic is required and entailed in delivering social equality or level playing fields or universal healthcare. The “free market” is often accused of being unfair to the small guy or to the small business, and thus is the justification used for the well intended hand of the government to make things “right.” But in the very act of trying to make things right, the government must behave as the worst selfish monopolist who is constrained by no other force. The nature of government’s well intended actions is “coercion.” The nature of transactions in a “free” market is mutual agreement. At the heart of the market is the logic of peace and agreement. In a market setting, we can agree to disagree. In fact, there would be no exchange if we didn’t think we would better off making the exchange. So I think the exchange is better and you do too!!! such exchange leads to positive social welfare. when the government gets involved, this results in a logic of the zero sum game. One person gains at another’s expense, but this reality is rationalized as a price to pay for the intended outcome. The process of guaranteeing the outcome requires -- one way or the other -- that the government enforces its univocal view of what is “correct.” There is no room for agreeing to disagree. Means are justified by well intended ends, no matter if the means are in direct opposition to what is “intended” – and in fact, it is often the case that the means to achieve well intended ends requires coercion or some violent force or the threat of force. This is the opposite of peace and harmony.
We can live in a world that offers liberty and equal protection under the law – and that is inherently unfair, unpredictable and unequal. Or we can try to engineer a more perfect world that trades personal liberty for “social justice.” What we find out when we trade liberty for social justice is that we get neither. This is the law of unintended consequences: the best we can do is guarantee equal treatment under the law. We cannot guarantee equal outcomes or social justice or equal opportunity or fairness without at the same time giving something up in exchange. In fact, when we try to guarantee social outcomes, we must first trade liberty in order to achieve the intended outcome – which always proves unachievable thanks to the law of unintended consequences.
The Mystery Behind High North American Gas Prices: Solved
Seeking Alpha, September 25, 2012
By Keith Shaffer(Keith Schaefer writes on oil and natural gas markets in a simple, easy to read manner. His new newsletter will outline which TSX-listed energy companies have the ability to grow, and bring shareholders prosperity even in these tough times. He has a degree in journalism and has worked for several dailies in Canada, but has spent the last 15 years assisting public resource companies raise exploration and expansion capital.)
North American drivers are now competing with global drivers -- and global industry -- for cheap American crude. I went on FOX National Business News to explain why that is.
For starters, keep in mind that driving gasoline is 50% higher today than in 2008, relative to the oil price. Put another way, gas prices right now are near the highs of 2008 (when oil was a whopping $147 a barrel.) Yet the oil price is $50 a barrel lower today - that's what I mean by 50% higher gas. Why is that, exactly?
Look at these two charts that I talked about in the Fox segment , which help explain one part of a complex story. The first chart says there is a low amount of middle distillates globally-- these are the refined oil products that are used to power and transport the world: diesel, jet fuel, home heating oil, etc.
go to original article link to see chart:
The above chart means that either demand is low, or supply is low. But then I look at the chart below, and I see supply is high and rising, so I conclude demand must be higher (which I have to think is bullish).
go to link to see chart:
U.S. refineries are dramatically increasing their exports of light / middle distillates from the Gulf refinery complex out into the rest of the world. And yet global distillate levels are still low. That intimates a bullish world demand case to me, and tells me we won't see a dramatic drop in the price of oil.
Refineries export into a global market for their refined products, which are all priced on Brent Crude, while their input costs-- North American crude oil -- is priced on cheaper WTI, or West Texas Intermediate. That $15/barrel price difference between the Brent and WTI is pure profit for refineries. The WTI price is so much cheaper because of the HUGE supply of new oil created by the U.S. in the fast-growing Shale Revolution.
It allows refineries to choose whatever global product has the best price for export, and that's not always driving gasoline for North Americans. Several North American refineries are trying their best to move their processing over to other products besides driving gasoline. But even with lots of gasoline, domestic drivers are now competing with those around the world for cheap North American crude products. And that should keep retail gasoline prices high.
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