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To be prepared for war is one of the most effectual means of preserving peace. A free people ought not only to be armed, but disciplined.

ideas > Bart Stupak is an economic idiot

Bart Stupak is an economic idiot
Bart Stupak, a Democratic Congressman from Michigan, constantly makes statements about oil speculation that are flawed upon cursory examination. In a USA Today story, Mr. Stupak was quoted as saying ď"When the CFTC granted the 1991 hedging exemption to J. Aron (a division of Goldman Sachs), it signaled a major shift that has since allowed investors to accumulate enormous positions for purely speculative purposesÖlegitimate businesses that hedge and take physical delivery of oil are being trampled by the speculators who are in the market purely to make profit."

Stupak is attempting to demonize legitimate business activity, which is a typical ploy of the anti-business left. He attempts to connect a 1991 change in the rules with current oil speculation. If there truly was a connection, why didnít they oil speculate in 1991 when the rule was changed? Why were oil prices low during the 90s and the first part of the 21st century? Clearly, Stupakís assertion is false. It might sound good. It might create a bogeyman, but as with most bogeymen they are make-believe.

Stupak then seeks to make the speculation a dirty word. People speculate every day. If you think the price of anything will rise in the future, you speculate and buy more of it now. If a hurricane is forecast to hit, you speculate and run to the grocery store to buy extra food. That increased demand causes prices to rise. Speculation is not a bad thing. It is a way for people to hedge against future shortages by locking in current prices. If speculation only led to huge profits, then these so-called oil investors or speculators would continue to bid the price of oil up forever and constantly make profits, but that is not how it works. Prices rise and fall with supply and demand. The reason oil prices have risen so much is there is a perceived shortage of oil in the market due to the United States restricting oil exploration and drilling within its borders, environmental laws that restrict oil exploration throughout the world, and the increased demand for oil from China and India. Rising prices signal a shortage, which tell consumers to consume less and suppliers to supply more. Speculators can make a profit if they buy low and sell high, but then anyone else can do that as well. Stupak makes reference to businesses that take physical delivery. They can do what speculators do as well. Stupak tries to dirty the word speculation, which is really nothing more than investing. People who bid the prices of houses up were speculating as well. Investors who bid the price of stocks up during the Internet bubble were speculators as well. Why isnít Stupak attacking these folks? His arguments are incredibly shallow and are nothing more than socialist attacks on the market.

Finally, he ends his silly statement with the following shallow leftist rhetoric, ď...legitimate businesses that hedge and take physical delivery of oil are being trampled by the speculators who are in the market purely to make profit.Ē This is classis Marxist thinking. First, what legitimate business isnít for making a profit? Isnít that what any business has to do? Stupak attempts to demonize people who want to make a profit. Can anyone say Karl Marx here? Second, speculation is nothing more than hedging. They believe the price will rise so they buy oil contracts. If the price falls, they lose. If it rises, they win. Prices will rise if there is an underlying shortage. If speculators could truly cause prices to rise at will, then why were prices for oil so low during the 1990s and early 2000s? The truth is that the price of oil is determined primarily by the same laws of economics that govern every other good or service on this planet. Stupak just attempts to cloud the issue by demonizing an important part of any market, the speculator, and impugn their motives of wanting to make a profit. He does this for one reason and one reason only. He wants more government regulation and intervention like a socialist devotee. His arguments are shallow and limited, but then again, shallow and limited never stopped a true believer in the goodness of big government. Stupak is nothing more than stupid when it comes to economics. He seeks to cover up the federal governments failings in the energy crisis by doing what all terrible politicians do in times of crisis. They point the finger of blame every but true north, themselves. Unfortunately, most people do not realize the game that is being played. People like Bart Stupak can only exist in a climate of chaos that they create. Politicians like him need chaos to justify their existence and salary.
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