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Tuesday, March 07, 2006

On Stuff to Contemplate - Part 1


Here is a provocative article from Paul Craig Roberts. I'm not sure how I feel about a lot of the article. But in it he articulates a critical economic point that Americans need to understand (the sentence to which I'm referring is pasted below). And he says it in a way that finally crystallized my understanding on an important question.

The question of why the function of the U.S. Dollar as a store of value is so important to the standard of living of Americans. The answer is because:
  • If we can’t produce enough valuable goods or maintain a strong currency, we won’t have access to the oil.

In other words, he is suggesting (correctly, I think) that America will not be able to force countries in the Middle East to sell oil to Americans through military force. War will not work. What we should be doing instead is (1) focusing on maintaining a strong currency (i.e., stop inflating our fiat currency) and (2) concentrating on creating and producing products of value to the countries where the oil is. Voluntary exchange will work.

If we have stuff the people who own the oil want, they will sell us the oil in exchange for the stuff they want.

If we take care of our side of the ledger, trade and commerce will happen.

Violence is so not necessary.

Photo Credits: here

13 Comments:

Blogger FLAMINGO1 said...

I thought we already had the stuff they want - like food.

As I recall from the great comedian, Sam Kinnison, "YOU CAN'T GROW FOOD IN THE DESERT!!!"

I agree with the premise, however. Free trade is more appetizing that blood for oil.

9:49 AM, March 07, 2006  
Blogger Chris said...

The concern that the dollar will devalue to the point that we cannot use it in world pamrkets is a becoming a bit overdone. The United States is going to be a world economic powerhouse for generations, simply because of our various resources and capacity. The value of the dollar will follow. It may not be what it once was, but I don't see it becoming the 1930's Deutschmark anytime soon.

"Blood for oil" is loaded term that is only useful in whipping up liberals into a frenzy.

12:06 PM, March 07, 2006  
Blogger garrett said...

TOPIC #1.
We could debate whether the concerns about the coming dollar devaluation are overdone. In my view, that is a point of legitimate debate. Reasonable people can disagree about that.

TOPIC #2.
But I do not think the same is true with respect to the general principle that persistent monetary inflation will destroy the currency. History indicates I have the high ground on that point.

So, me having become by nature conservative (lower case "c") on these important topics, I'm inclined to think if policymakers followed the conservative route on TOPIC #1 (i.e., if policymakers agreed with the chicken littles predicting the dollar and America's demise), they would be making the intelligent bet.

To do otherwise is to go against the grain of history, and that ain't smart.

12:32 PM, March 07, 2006  
Blogger Dongley Shlongford said...

Around here my ink is so highly prized that it is accepted as currency. So tell me, is it undervalued?

5:58 PM, March 07, 2006  
Blogger Bloodgood said...

so what your saying is that we should buy their oil and sell it back to them in the form of crappy plastic nick naks or other useless shit? Do you think they need beanie babies? I thought thats what china was for.

12:03 AM, March 08, 2006  
Blogger garrett said...

Bloodgood, I am puzzled how to address your comment. I deem your comment trolling, but I'll take the bait.

Your choice of verb is critical, of course. You used the verb "buy." This is the correct verb, as it implies a transaction entered into freely by both sides. Which is the sort of transaction I think is ideal and also absolutely necessary for Americans and everyone else to enjoy peace and prosperity.

Elaborating slightly ... I guess to the extent the owners of the oil would voluntarily deliver oil to Americans in exchange for "useless shit," that does seem like a beneficial arrangement for Americans. But that's not really what I am advocating.

Flamingo is closer to what I am advocating, and I think he is right. Americans can produce massive quantities of food. To the extent the owners of oil need or want to deliver oil to American food producers in exchange for American-produced food, that is precisely the kind of voluntary, mutually-beneficial transaction I think leads to peace and prosperity for the multitudes.

++++ SIDEBAR ++++
Notice I did not address whether American food producers can produce food more cheaply than competing food producers in other countries. Government interventions in agriculture markets are just as pervasive, distorting, and harmful as in most every other market. So that is an important topic but it is not our primary focus in this discussion.
++++ END OF SIDEBAR ++++

11:57 AM, March 08, 2006  
Blogger FLAMINGO1 said...

Turn McDonalds loose on those SOBs. Then they will be too fat, lazy and clogged with cholesterol to blow shit up.

That's the kind of food we need to trade with them. We know that McDs can produce food more efficiently and less expensively than any other business in the world.

Trade them grease for oil!!

2:21 PM, March 08, 2006  
Blogger Bloodgood said...

Sorry, I didn't mean to sound trolling.
I agree that anytime anyone buys American it would be good for us.
Now if only we could get America to buy American we would be really well off.

FLMG-
I love the "Grease for Oil" line, I see a new T-shirt with a Farside type comic on the front.

5:18 PM, March 08, 2006  
Blogger garrett said...

Bloodgood, thanks for the response. Sorry that I misinterpreted your remark. I'm thrilled to hear that you weren't trolling. I think it clear, however, that you should seek economic wisdom at the Chapel von Mises. Austria, baby. Austria.

Vivamus tellus erat, egestas non.

In other words, consumers are motivated by price and utility (quality). If American producers make the best widget for the price, consumers (including me) will buy widgets from American producers. If American producers do not make the best widget for the price, consumers (including me) should not buy widgets from American producers.

Patriotism has no place in commerce. Telling consumers they should buy shoddy, overpriced products produced by American producers is like telling your employer they should continue to keep you on staff even though there is another person who will do twice as good a job as you for half the money. It's immoral. It's indecent. It's incorrect.

See Should We Buy American? for the straight dope.

5:34 PM, March 08, 2006  
Blogger crallspace said...

I wish our leaders weren't such miserable, cynical pricks.

7:25 PM, March 08, 2006  
Blogger The Velvet Fog said...

Uva uvum vivendo varia fit.

Get all latin on me will you....

8:04 AM, March 09, 2006  
Blogger Erin O'Brien said...

TAG! You're it. More info here.

8:58 AM, March 09, 2006  
Blogger Chris said...

Screw buying American. I invariably buy the product I deem to be the best value.

2:59 PM, March 09, 2006  

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