Tuesday, May 19, 2009

Ungrounded in Market Forces

We watched the free market function during the last year despite the tentacles of government being fully intertwined with the commodity in question. I'm talking about the price of gasoline.

Remember roughly one year ago that gas was costing drivers about what it does today. Then, market instability reared its ugly head. Unrest in the middle East and socialization in Venezuela indicated potential disruptions in supply. Inexorable growth in demand in China and India put pressure on that side of the equation. Prices soared like an NFL lineman who just discovered HGH and testosterone. By October we saw gas prices double. It was $4.25/gallon and six bucks was in our future in less than a year.

Our congress-critters wailed that nothing we could do would impact the situation. Better sit on our hands rather than start exploiting our national resources. No hope for even a dime of price reduction in less than ten years.

But, then people started becoming aware of how much gas they were using. Demand dropped. Supply remained steady. The price responded and within four months dropped by 60% back to where it is today.

The government didn't do a damn thing. The market did. Adam Smith was right.

Now we've got the nationalized car companies under the wise and benevolent leadership of the Messiah. He knows that with a wave of his hand we can solve our gasoline problems. We hope, he changes.

Read it and weep:

So Let it Be Written, So Let it Be Done

If CAFE standards were the root cause of the disaster that is Detroit, why not simply raise them even further? Sure, we'll just legislate. The engineers will make it so. Won't they?

I'm thinking that what this means is tiny tin boxes on itsy-bitsy wheels with contortions required to get in and out, but at least they will be easy to park.

Auto makers will whither, travel will be uncomfortable, jobs will be lost, deaths will soar as accidents become more deadly, and the environment won't be one whit different.

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