Adam Smith Redux

The principle is so simple. If there is a lot of something and nobody wants it, it will be cheap. If there is very little, but everyone wants some, it will be expensive. The part that liberals don't get is that if you stand aside, there will be a shift. Too much? People will stop producing it. Too little, resources will be brought to bear to meet the demands. As the relationship changes the price will move in the desired direction. "Invisible hand"...catchy phrase that.

Of course, there is no such thing as delayed gratification in the liberal play-book. As J. G. Wentworth keeps ranting, "It's my money and I want it now!" That's why libs love Keynes.

What amazes is that the rest of the world, at least the successful parts, gets it. Remember OPEC? What's going on there?

Oil is a limited resource. At some point it runs out, although when it runs out is a date that keeps getting pushed down-range, unless we go enviro-whacko and tie our own hands behind our back. The OPEC nations have lots of oil. They have lots of demand. They can pull a Wentworth and get a seemingly large lump sum now, or they can collect the annuity over decades if they don't get greedy. Controlling production supports a healthy price and stretches out dissipation of the resource over time.

So, they combine and agree to restrict their production. They limit supply and keep the price up to maximize their return. Classic economics.

Now we see this:

Saudis Bag Double the Gold

Well, how do we make out in that one? Keep the gold off the market and you restrict the availability which causes the price to rise. In the process, your horded reserves appreciate significantly. Life is good.

What is the US situation? We've based our economy on fiat currency. We say a dollar is worth something, but there isn't any fixed commodity that relates to what we say. That works nicely when everyone wants dollars and trusts the US. But how about when the US is borrowing from anybody in vast quantities with little apparent ability to ever make substantial repayment for the venal purpose of simply handing out welfare to the voters?

Is the Saudi currency going to be valued? Is the US dollar?

It seems these benighted desert dwellers have learned the basics much better than we did. Once we knew, but now we have forgotten.