I’m taking a class on the geopolitics of oil here at OSU, and as I listen to the history of oil, I can’t help but see the geopolitics of oil through the lens of that basic framework. For example, one of the problems with oil is that the price and supply of oil is volatile. Therefore, governments engage in all sorts of schemes to try to keep oil prices low for their voters. I could say more, but just observing oil politics today will show that government is failing at maintaining stable prices, that all sorts of international conflict occurs as governments jockey for oil power, and that trigger-happy countries are doing their darnedest to keep us all on the verge of World War V.

What would stabilize oil prices? A functional futures and options market. A futures market (and options trading) allows for the rationalization of future economic decisions based on the best possible current data in a way that no bureaucracy can. It smooths out price moves, it eliminates the unreliable and imprudent, and hands over wealth to those who know how to grow it and provide stable, reliable services to customers.

But for a future’s market to be as reliable as it can be, it needs a number of conditions. For one, it needs a stable unit of account that agreements can be made in. Unfortunately, in this era of fiat currencies, governments are constantly manipulating their currencies, which means that any trading futures or options in oil has to do double duty as a currency speculator and a resource speculator. This sharply decreases the efficiency of the markets. Secondly it needs capital, which is problematic because high tax rates, corporate bail-outs, and constant changes in governmental policies toward energy destroy capital, hand it over to those who have demonstrated incompetence in handling it, and add unacceptably high levels of risk to an already risky field. And wars complicate things further.

We can, if you want, discuss and argue any of the sub-points of this basic argument, but the central conclusion that everything I’m learning seems to lead to is that our governmental attempts to rationalize and stabilize the economy are leading to greater instability, in turn leading to greater governmental intervention. In particular, our mishandling of currency and banking, our subsidizing of ‘too big to fail’ industries, the turning-over process of government under democracy, and our showy but ineffective buffet of constantly changing environmental policies cause all the various sectors of the economy to yo-yo constantly, a yo-yo-ing which is one of the principal justifications for the continuance of our meddlesome ways.

I yearn for the day when we realize that a system of mass elections can never, even indirectly, direct complex economic policies. Then and only then will we step off the carnival ride and start talking about our issues like grown-ups.

A dealer bought a thousand tons of copper. He sold them, as prices rose, with considerable profit. He consumed only half of the profit and saved the other half. He invested again in copper and got several hundred tons. Prices rose and rose. The dealer’s profit was enormous; he could afford to travel and to buy cars, country houses, and what not. He also saved and invested again in copper. His money capital was now a high multiple of his initial one. After repeated transactions–he could always afford to live a luxurious life–he invested his whole capital, grown to an astronomical amount, in a few pounds of copper. While he and the public considered him a profiteer of the highest income, he had in reality eaten up his capital.

From ‘The Consumption of Capital in Austria,’ Review of Economic Statistics 17 (January 1935): 16.

Is Acts 2 in tension with capitalism?  Not in the governmental sense of the word.  Indeed, a principled capitalist would be outraged if anyone interfered with any group’s decision to pool resources and pursue need-based allotment.  Where the principled governmental capitalist must draw the line, however, is when someone tries to establish such a system of sharing by forcing other people into it.  That’s where it ceases being charity and becomes robbery.

Yup. The dollar is monopoly money; people just don’t realize it yet. It’s like the emperor with no clothes; it’s still treated as valuable, though everything we can see argues against it.