Pay No Attention to the Men Behind the Curtain

Apparently the markets are all in an uproar over the prospect that
inflation is about to rear its ugly head. All we can say is, it’s about
time. It seems clear to the Dowbrigade, from an intuitive layman’s point
of view, that despite the OMB’s repeated claims to the contrary,
the cost of living, in all senses of the word "cost" has been climbing
steadily for some time now. We have long suspected that the "official" US inflation
rate of 1.9% is more fairy tale than fact.

It also seems clear that the main culprit or component in the current
round of "invisible" inflation is the price of petroleum.  Even
economic half-wits like the Dowbrigade understand that the
motor which drives the US economy runs on petroleum. Every product in
the entire economy that is not delivered digitally is driven to its destination
by gas-guzzling internal combustion engines.  A component of every
product’s price is "transportation", and that takes oil.

In addition whole industries, from plastics to drugs to chemicals to
fertilizers are derived directly from petrochemicals. It has recently
been straining our credibility to accept that skyrocketing oil prices
have NOT been reflected in the consumer price index. Less than 6 years
ago, in the summer of 1998, the price of a barrel of oil was scraping
$10! On 9/11/01 oil was $21 a barrel, and as recently as a year ago it
was at $25. Now it is rapidly approaching $40. Call us a simpleton, but
we are unable to understand how a 400% increase in 6 years in such a
vital segment of the economy could NOT set off significant inflation,
without some serious smoke and mirrors.

Every sector of the economy is being affected by the current run up
in oil, and the only one which can count it as a positive is – the OIL
INDUSTRY. Without any need to modernize or get more efficient, and working
at the same percentage profit margin as always, their earnings and profits
should have QUADRUPLED in the past few years. Nice work if you can get
it,

Of course, the fact that the current administration is more steeped
in oil than the fried dough at the state fair is merely a fortuitous
coincidence. The Texas cartel, Bush and his buddies, obviously had nothing
to do with this monumental scam.  Now, if they can just keep cooking
the country’s books for another 6 months, until after the election, they
can rest easy for at least several more generations.  By which time
they will probably have invested some small but sufficient percentage
of their windfall in electric cars, or hydrogen fuel cells, or centrally
distributed
alternative
energy sources, to dominate power generation till the end of time. Ain’t
free enterprise great?

from the New York Times