Why do people with no apparent knowledge of economics so consistently feel the need to remind everyone of that fact? If I knew nothing about something, I would have the good sense not to discuss it in public, but that's just me I guess.
Today's offender, joining a stellar list that includes the Democrat Party leaders of both houses of Congress, is Dick Morris.
For once, it is the Democrats who have the right idea…we can only hope that the Republicans come along.
Senators Chuck Schumer and Harry Reid are pushing legislation to restore the controls over the oil future's market speculation
This is as backwards as one could get. Showing a shocking lack of knowledge of the benefits and purpose of the futures markets, Morris' "logic" here is astounding:
If there is any doubt that it is speculation, not the supply and demand for oil, that is driving up the price, look at this week's history of oil prices. After Bush announced that he was rescinding his father's executive order and permitting off shore drilling and after OPEC announced a weakening of oil demand, the futures market price dropped $15 per barrel. No new oil gushed through the system. The speculators just switched their bets from up to down. With the Democratic bill, they will just have to double their bets on horse racing and leave oil futures alone!
The futures market, Dick, exists to allow buyers and sellers to know with a reasonable degree of accuracy what prices they can expect to pay for future commodities and how much the sellers can reasonably expect to receive from their commodities.
The market price of a commodity must bear some relation to the expected future value of that commodity. When President Bush makes it known that America will no longer stick its head in the sand ignoring its abundance of available oil, of course the future price of oil will drop. People will judge that oil will be more plenteous in the future. It's all supply and demand, apparently a more complex concept than Morris' mind can fully, or even partially, understand.
Oil speculation worked exactly as it is supposed to in a free market. As world demand increased, U.S. production decreased, entirely due to America's past energy policies. This caused speculators to envision future scarcity, causing prices to go up. With high gas prices, consumers demanded that their government do something about the problem. At the first sign of doing so, speculators correctly assumed that the future supply would now increase, causing prices to drop. Simple. Effective. It's how the market corrects stupid political decisions.
Meanwhile, as usual, liberals like Charles Schumer, Nancy Pelosi, Harry Reid, and yes, Dick Morris draw the exact wrong conclusion from it.
You have to try real hard to spend as much time in politics as these people have and still be so entirely daft. Either that or you have to be intellectually dishonest. With Morris, my guess is that it's the former. With the other three it is surely the latter.
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