Understanding Oil Economics
Tom Friedman writes in NY Times about how US should sustain high oil prices to force research in alternative and domestic sources of energy.
This was disputed by Henry C.K. Liu of Asia Times in a lengthy four page article, full of interesting data and analysis, but rambling at times and lacking a sharp focus.
Select quotes.
In other words, higher energy prices do not take money out of the economy, they merely shift profit allocation from one business sector to another. More than $365 billion a year goes to foreign oil producers who then must recycle their oil dollars back into US Treasury bonds or other dollar assets, as part of the rules of the game of dollar hegemony. The simple fact is that a rise in monetary value of assets adds to the monetary wealth of the economy.
The fact of the matter is that the US already controls most of the world’s oil without war, by virtue of oil being denominated in dollars that the US can print at will with little penalty. Petro-war is launched to protect dollar hegemony, which requires oil to be denominated in dollars, not physical access to oil. Much anti-war posturing in an election year is merely campaign rhetoric.
For those of you not interested in reading this - his argument about “political economics” can be summarized as complex math, where you’re asked to do “2+2″ for variable values of 2. Another key argument is that the big guys (Wall Street, Arabs) are always going to protect themselves with “hedging” - so it’s the little guy who always loses. And a bunch of other insightful stats about money supply (translation: how you become poorer with constant bank balance and low inflation - which is manipulated by governments).
In the end, it’s clear that Friedman is a journalist and Liu is an economist.