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Gasoline Prices Are Not Rising, the Dollar Is Falling
Topic Started: Feb 24 2012, 09:39 AM (866 Views)
Mountainrivers
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Chris
Feb 24 2012, 10:44 PM
Mountainrivers
Feb 24 2012, 10:33 PM
Chris
Feb 24 2012, 10:26 PM
US $ is not pegged to gold anymore so there's no relationship. The market value of gold is up, the dollar down. Means less purchasing power, it takes more dollars to buy less.
Well, yes, isn't that called inflation? What am I missing?
Nothing. Oh, maybe the causes of inflation like stimulus plans, quantitative easing, etc. These actions cheaper the value of the dollar.
Yes, but they might very well have saved the dollar from further devaluation. We'll never know.
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Chris
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At what cost? Here's another explanation, somewhat humorous, that gets into some of the costs of inflating money...

Gasoline Prices and Dollar Prices
Quote:
 
It's not that gasoline is more expensive; it's just that your dollars are worth less. But neither the media nor the political establishment wants you to realize the real reason Americans are experiencing pain at the pump.

Surging gasoline prices are back in the news, and President Obama shows his concern for Americans by doing what he does best. He gave a speech. Happy now?

Of course the grumpy old conservative naysayers place blame on the Obama administration for the surging prices! They point to the administration's denial of the Keystone pipeline and additional supply of Canadian oil sands as illustrative of an anti-energy policy that tries to dictate against the free market that we are all to drive flammable 40-mile/charge Chevy Volts. They point to Obama's own Energy Secretary Stephen Chu, who believes that "[ s]omehow we have to figure out how to boost the price of gasoline to the levels in Europe." They point out that President Obama doesn't in fact have a problem with high gas prices; he just prefers a "gradual adjustment." (Is four years long enough?) They point to the reaction of Speaker Pelosi in May 2007 when the average national gas price was only $3.05/gallon, calling it the Bush administration's "failure" and accusing the Bush administration of years of policies favoring "Big Oil." They point to the price of gasoline on January 20, 2009 being a bargain at $1.83/gallon, now having basically doubled and headed much higher. Effective talking points all.

Well, I'm here to give the Obama administration and the media (but I repeat myself) their most potent rebuttal to these unfair attacks. Here it is:

The real price of gasoline has gone down during the Obama administration. Gas is actually cheaper now.

"What?!" you say. "I just paid over $3.50 per gallon for a fill-up! How can this be?" Glad you asked. Put down your Slurpee. Let's go through this. The dollars that you have in your pocket are pieces of paper that hold value only because they are "backed by a gun." The "gun" being the United States Government and the Federal Reserve. The dollars that you have in your pocket are "fiat money" (the term "fiat" is Latin for "let it be done"), not backed by anything of actual value since August 15, 1971. Cash is just paper. Call them Bernanke Bucks.

What "stores" value, if not the "let it be done" Bernanke Bucks that are "backed by a gun"? Precious metals, of course. Traditionally hedges against inflation because they are always worth something. They are valuable by themselves, without the gun. They are real, hard money, as opposed to fiat currency. They possess qualities that have been valued by humans ever since we started pulling them from the ground long ago. Therefore, there will always be a market for them. They have "objective value." So let's talk about the price of gas compared to something of actual objective value: precious metals.

If you pulled up to a 7-11 station on January 20, 2009 and all you had was silver American Eagles in your pocket, how many ounces of silver would you have paid per gallon? On that very day, silver was trading at around $11.47 per ounce. The average price of a gallon of gasoline was around $1.83 per gallon. So let's work it out (I didn't tell you there would be math, sorry):

Posted Image

So to purchase 10 gallons of gas for your Toyota Prius (alas, there was no such thing as a Chevy Volt at the time) would've cost you 1.6 ounces of silver.

Fast-forward to today. If you pulled up to a 7-11 station today in your flammable Chevy Volt, things would be different. As of this writing, silver is trading at $34.190 per ounce. As of this writing, the average price gasoline is $3.545 per gallon. So now we have:

Posted Image

See that? A 10-gallon fill-up for your Chevy Volt today would cost you an ounce of silver, or a single silver American Eagle coin. That's down from 1.6 ounces of silver for the same 10-gallon fill-up in January 2009. Gas is actually 35% cheaper, you bitter clingers!

Alternatively, the Obamedia could credibly claim that gas prices are even a little cheaper compared to gold. Working out the same formula with gold, you would fork over 0.002133 ounces of gold (at $858/ounce) in January 2009, while you would pay 0.002018 ounces of gold (at $1756.40) today. See?! Gas is even 5.4% cheaper today when compared to gold. High gas prices? What are you talking about, rubes?

In all seriousness, what do these numbers mean for what you are paying at the pump? Here we have the main point of this piece, so let's go throat-clearing all-italics:

It is not that the price of gas is more expensive; it is that your dollars are worth less.

This is evident to anyone with a modem, a calculator, and a basic knowledge of economics. Even more obvious to anyone who has read Rand. The "destroyers" described by d'Anconia are destroying the fiat dollar. They are the Federal Reserve led by Bernanke, who has enabled the Obama administration's spending spree to the tune of over $5 trillion in debt for a single term through artificially low interest rates and "quantitative easing" (i.e., monetizing the debt). The same person, Bernanke, has testified under oath that the Federal Reserve "will not monetize the debt." Yet it is obvious that that is exactly what has happened. It ought not surprise anyone with a knowledge of history that the present Obama-Bernanke fiscal-monetary course is exactly opposite the policies of President Reagan and Federal Reserve Chairman Volcker in the early 1980s, with predictably very different results. So we now have inflation coupled with low economic growth, or stagflation. Welcome back, Carter.

It is my hope that someday, after the gold standard has been re-established to protect us from future Keynesian presidents, we will look back at this period and marvel at the attempt made by d'Anconia's "legal looters" of our dollar's value.

But for now, enjoy your silver gas price deal.
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Mountainrivers
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"At what cost?"

Well, if we don't know what might have happened, the cost seems irrelevant because it could have been much more. Our auto industry survived, our banks survived. If they had failed, the possible losses could have been staggering. 780 billion seems to me to be a relatively small cost to save the economy.
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Chris
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But we do know what it cost. We're in debt up to our eyeballs. Who's going to pay for that? Or do you just assume the government bubble will burst?
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Mountainrivers
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Chris
Feb 25 2012, 05:50 AM
But we do know what it cost. We're in debt up to our eyeballs. Who's going to pay for that? Or do you just assume the government bubble will burst?
Well, when faced with bad or worse choices, I suppose you have to choose. Obama chose to do something rather than do nothing. It might turn out to be disastrous, but it might turn out great. We will just have to wait and see. I don't understand people who are complaining before the verdict is in.
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Chris
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Mountainrivers
Feb 25 2012, 06:36 AM
Chris
Feb 25 2012, 05:50 AM
But we do know what it cost. We're in debt up to our eyeballs. Who's going to pay for that? Or do you just assume the government bubble will burst?
Well, when faced with bad or worse choices, I suppose you have to choose. Obama chose to do something rather than do nothing. It might turn out to be disastrous, but it might turn out great. We will just have to wait and see. I don't understand people who are complaining before the verdict is in.
IOW, he was choosing from ignorance? Sometimes doing nothing is better than doing something.
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Jim Miller
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Yup.
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