Prisoners of Dogma

The current inflation gives us insight into our inability to use common sense and logic to solve problems. We know inflation results from too much money chasing too few goods. You can end inflation by severely restricting the money supply. The Federal Reserve stopped the inflationary spiral of the 1970-80s by tightening to the point where interest rates were higher than the rate of inflation. Rates went above 18% while inflation was t 14%. The result was a deep recession with unemployment above 10%. 

Today it would take interest rates above the current 7 1/2% inflation rate. This move would mean mortgage rates about triple g from where they were at the beginning of the year. The resulting recession would probably end rapid inflation but at a horrible price. Anyone with variable rate loans or an adjustable-rate mortgage (ARM) would be in a dark place. 

If we only slowly raise interest rates, it adds to costs and feeds rather than stopping inflation. Interest rates are a blunt and cruel instrument.

The other path is to increase supply. The most visible commodity affecting almost all our endeavors is energy. Today most of our energy comes from fossil fuels. Every time we fill up at the pump or open our heating bill, we are made painfully aware of inflation.

Expectations drive inflation. If we feel prices will be higher in the future, we buy now and buy more in anticipation. This perception adds to demand. Inflation’s upward march is most visible in the price of gasoline. If the price is still rising at the pump, we know prices are still going up. For this reason, it is essential to stop the upward march of oil and natural gas prices.

Much of the energy price rise is self-inflicted. Before Covid, the US was energy independent. We were producing approximately 2 million barrels of oil than today. After completing the Keystone pipeline, we expected more North Dakota and Canada oil. Tapping the Arctic Reserve would bring even more. Expanded fracking in the lower 48 connected to new pipelines, further growing our production. 

The world trading of oil and liquified natural gas means any supply change affects prices everywhere. Unfriendly countries like Iran, Venezuela, and Russia are dependent on oil and gas exports. Our rising production forces them to sell more at lower prices for the same revenue. If the US displaces Russian gas, Russia must sell more oil to replace the income. 

The Biden administration foolishly blocked Artic production, the Keystone, and other pipelines while withholding leases and discouraging oil and gas investment. These actions have resulted in millions of barrels less oil on the world markets, contributing mightily to the inflationary spiral.

Not only does our production affect the prices at the pump, and it enhances our national security. If Russia was getting 30% less for their oil and gas, would they be able to fund their Ukraine adventure? Less fossil fuel money would make the pain of sanctions that much sharper.

If more oil and gas aren’t on the horizon, the incentive in inflationary times is to withhold supply to sell higher later. Both Saudi Arabia and the Emirates have the slack to produce more, but why should they? Even American producers are only drilling to maintain current production. They’re recording record profits without risking capital. Given an unfriendly government, this is prudent.

If a coach sees his game plan is awry, going in another direction is the only chance for victory. For the best of reasons, you thought the program would work, but it failed. Change things up or lose. 

The world will be dependent on oil and gas for decades into the future. Millions of people still lack the energy to improve their lives. They need the cheapest and most reliable power possible. As I’ve pointed out, solar and wind don’t fill the bill. Logic and common sense tell us to reverse field and do everything to increase the US and Canadian production.

Further, we need to find more all over the world. However, our policy discourages any capital investment in oil and gas anywhere.

Unfortunately, change won’t happen under the present administration. A nation founded in the Age of Reason ruled by the unreasonable. Just as the Government Medical establishment refuses to entertain other ideas and data on Covid even when its actions prove disastrous, Biden maintains the same elite positions even when proven wrong.

Maybe Divinities are perfect, but humans aren’t. We make mistakes. It’s how we handle them that separates success from failure. When I act, I always try to have a point where I admit I’m wrong. Unlike some others, I know I’m just a human.

True belief in the righteousness of their cause lest the mob sees feet of clay is akin to a religious dogma rather than sensible discourse. I’ve pointed out Germany has displayed a similar incoherence. In reaction to the Fukushima Nuclear Accident in Japan, it’s closing all its carbon-free nuclear plants. In contrast, Japan is planning to restart a nuclear reactor. France gets most of its electricity from nuclear and plans to build more plants. Over decades, neither Germany nor France has had significant problems with their nuclear plants. 

Germany is replacing its nuclear and coal plants with wind and solar. As these are unreliable, they need lots of backup natural gas. They plan to fill their increased gas needs from Russia primarily through the Nord Stream 2 pipeline. This plan puts them at the mercy of NATO’s greatest threat. Meanwhile, heating costs in Germany have exploded.

In the US and Germany, considering problems logically has been replaced with a nearly religious belief in government infallibility. Rather than discussing the issues with people of equal or superior brainpower. The calamities from Afghanistan through Covid testify to the stupidity of this approach.

Our energy policy is a great place to acknowledge our humanity and change course. To the Biden administration, this is heretical. However, it’s what a rational person would do.   

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