Gas Prices To Rise, Thanks Trump!

OPEC a group of the world’s largest oil producing nations has officially announced that it will be cutting oil production starting in January. The drastic cuts in production will inevitably cause the prices at your local pump to start rising. The news of these cuts alone caused the price at my local pump to jump 15 cents in the span of just one day. The full impact of these cuts aren’t expected to hit until January, but already oil speculators are getting ready.

Now normally I would laugh at almost anybody who blamed oil prices on a president. Generally people who do so know little or nothing about how and why oil prices are actually set, but in this particular case the timing of these cuts are no coincidence.  This is the first time OPEC has agreed to cut oil production in eight years(how long President Obama was office), and they’re doing it perfectly to coincide with Trump’s inauguration.

So the question is why?  The answer is pretty simple. President Obama made the move toward renewable resources a chief plank of his administration. He wasn’t as successful as he would have liked to have been, but the pure and simple fact that he made the threat mattered.

If you’re an OPEC country who’s primary source of income is oil production the threat of the United States moving away from oil entirely and coming up with new technologies that require no oil whatsoever should terrify you.  If and when that happens your entire country will be ruined.  The value of your biggest natural resource would plummet to nothing.

What then is a major oil producing company to do?  Simple, you kill two birds with one stone. You radically increase your oil output. This has two effects. One, it radically lowers the price of oil, and makes it less likely that the United States will move away from it. Why would anybody buy an electric car when the price of gas is dirt cheap. Second, it makes sure you get something for your oil while you still can. Inevitably the world will begin to move away from oil so if you don’t use it up then you lose it. They figured they might as well pump as much of it out of the ground as they can. Even if they can’t get as much as they want for it that’s still better than nothing.

But now that America has elected Donald the Dumpster Dumbface into the White House there is no more reason to fear. Oil companies are now firmly back in control of the United States which means that demand for fossil fuels aren’t going anywhere anytime soon. Without fear that renewable resource will come along and make their oil worthless there’s no reason to blow threw it quickly, and there’s no reason to motivate Americans not to buy electric when their own dumb president will likely make that impossible anyway.

The result is a return to higher oil prices.  They can now pump out fewer barrels of oil making it last longer, and charge significantly more money for each barrel.  Thanks Trump!

In fact the fear that President Obama and Democrats would get us off fossil fuels was so high that some OPEC nations like Russia were driving themselves into recessions by keeping their prices so low in desperation to not lose their cash cow. Still don’t believe Russia influenced the election?

So in a few months after Trump gets inaugurated and gas prices start heading north again make sure all your Obama hating friends that tried to blame him for oil prices at the beginning of his presidency, and then didn’t give him credit for them falling towards the end know exactly what is Making Gas Expensive Again.


Changing The Way You Think About Debt.

The U.S. Dollar has value because we say it does, and if you don’t like it then you can go fuck yourself.

Debt sucks! Believe me if there’s anybody that understands that it’s me. I’ve been paying off student loans for over a decade, and I’m still about four years from being free of them. DollarNot to mention the fact that because I’ve been contributing so much of my monthly earnings towards them that it’s really difficult to save any money for other things I need. The result? Credit card debt, and a car loan which is even worse.

Millions of Americans have similar problems.  In fact most people are likely significantly worse off than I am.  I graduated right before the financial collapse and I was lucky enough to get my foot in the door of a solid company that didn’t lay anybody off during the crash. It’s not surprising then that so many people are very concerned about the national debt this election year.  We fear that America is in the same position with China that you are with your bank.  But here is the reality that you need to understand….

China isn’t the bank…….we are.

When you go to your bank and open up a checking account or a savings account your bank is voluntarily taking on debt from you.  It owes you that money back with interest. Granted it’s a very small amount of interest.  If it’s a checking account it’s almost certainly less than 1%. If it’s a savings account it’s almost certainly less than 2% particularly with interest rates set so low.  Is your bank worried? Is your bank fretting about the fact that it’s living paycheck to paycheck?  Seems crazy to think about that, but when you deposit your paycheck you almost immediately turn around and spend it all in a week’s time. From the perspective of your bank almost every dime that comes in just goes right back out.

But no, your bank isn’t worried.  Your bank is happy to take on as much debt from you as you’d like to give it. In your bank’s mind the debt it has is actually an asset that it wants more of.  The reason is because while your bank owes you a ridiculously low interest rate on that debt it turns around and invests that money in other things that pay a much higher interest rate.  It buys stocks, bonds, and it loans that money back out to people to buy homes, cars, and it gives people credit cards.  So long as the interest they are getting returned to them on those things is higher than the interest they owe back to you they win.  They actually make money off of their debt.

The same thing believe it or not is actually true about America.  America is just about the safest investment on the planet.  Even with Republicans threatening to default, America still has the highest credit rating credit rating agencies give out.  People are more than happy to lend us money because they have confidence that they will get it back with interest.  The key is how much interest?

When many people including some very ignorant politicians talk about the deficit they make statements about how we’re putting things on “the credit card” and forcing future generations to pay it back.  That analogy is very very poor to say the least.  A credit card will almost assuredly charge you double digit interest rates of usually more than 13%. That’s why they’re so dangerous because they can be very difficult to pay off.  With the national debt however the interest that America owes back is usually a little more than 2% which is similar to what your bank owes you on your savings account.  Meanwhile the US economy has historically grown at a rate of closer to 4%, almost double what we’re paying back out. Even today with all the financial issues we’ve had over the last decade we are projected to grow at closer to 3%.

When we take on debt we’re essentially letting China and others open up savings accounts with us.  We are then turning around and investing that money in our country.  So long as our GDP continues to grow at a higher rate than the interest we owe back, we are actually making money on that investment.  Our debt can actually be thought of as an asset in the same way that a bank would.

Now this is not to say that deficits don’t matter.  Obviously owing a little over 2% while projecting only about 3% growth isn’t giving us a huge margin for error. I’m not suggesting we just run soaring deficits all day long by any means, but it’s important to realize that the national debt is very very different from your own personal debt.  People hear words like Billions and Trillions and they think about those massive numbers that America owes and they try and rationalize it by thinking about their car payment or their credit cards.  That national debt is more like buying a house, it’s usually a pretty decent investment.  So long as the value of your home increases at better than or close to the same interest rate you’re paying on your mortgage you’re actually coming out ahead so long as you can afford your payment.

Now some people will say okay, but what about Greece?  What about Puerto Rico?  Look what happened to them when they got into too much debt.  Comparing them with America is absolutely ridiculous for a number of reasons, but one that is very important.  Greece and Puerto Rico don’t control their own money.  Greece is on the Euro, and Puerto Rico is on the U.S. Dollar.  When they get into too much debt Greece is at the mercy of the rest of Europe to print them more Euro’s to pay it off, and Puerto Rico has to beg America for help(which we should probably give them by the way).

America on the other hand can literally print enough money to pay off our debt.  It could be gone tomorrow if we wished to do it. In fact during the recession that’s exactly what we were doing. Now there are potential downsides to doing that, but realistically we aren’t seeing any of them.  In theory if you print too much then it’s possible that each one becomes less valuable and you have massive inflation on your hands.  That’s not happening though because the reality is we’re America and people want our money. They’ll happily take as many dollars as we’re willing to give them for the foreseeable future.

Now you’re probably thinking, “wait, wait, wait, wait… can’t just create money, that sounds like a Ponzi scheme.  Isn’t that what Enron and Bernie Madoff tried to do?” Well it sort of is except Enron and Madoff weren’t creating Enron Dollars and Madoff dollars. They were trying to create U.S. Dollars and they’re not allowed to do that because those dollars belong to America.  Only America gets to decide how many U.S. Dollars exist. We’re the only ones who can legally print it, and we’re the only ones that can legally destroy it.

American money is literally monopoly money in the sense that it’s just a piece of paper, but it has value because America has a monopoly on it.  You can’t do business in America without it.  The U.S. Dollar has value because we say it does, and if you don’t like it then you can go fuck yourself.

That sounds horrible to most people, but in reality it’s the truth about not just dollars, but most other things.  America isn’t the only one capable of doing this.  It’s the main reason why Europe formed the European Union in the first place. They wanted their money to have more clout.

Even private companies can do essentially the same thing. Take baseball cards for example.  They’re just special pieces of paper with famous people’s picture on them. Why are they valuable? Because people really want them for some reason. Usually some have more value because they have better players on them, but you can also alter their value by printing more or less of them.  Honus Wagner’s baseball card is worth millions. It’s not because he was the greatest player of all time it’s because there’s only like 10 of them in existence, and there’s no way to make more like it.  That’s it!  That’s really the only reason it’s worth anything at all.

I realize this may sound scary to some people, but it’s really not.  This actually works a lot better than you would imagine.  This is the main reason why we got off of the gold standard, and it’s one of the single biggest reasons we were able to get out of the great depression. To many people it may seem like just printing off money to pay for someone else’s hard labor is a dick thing to do, but the reality is that people are happy to take it from us because they have confidence they will be able to trade it in for something else. Something that they deam to be of more value later. So long as they’re willing to take it why wouldn’t we give it to them?  Should Nike stop selling Air Jordans even though millions of people are willing to pay them way more than they originally paid to make them?

The reality is that America is literally in the business of making money, and baby….business is good.


Trump/Manning 2016

…letting a businessman fix the economy because he’s done well in it would be like letting a rat fix a maze just because he found his way out of it.

trumpmanningSo you think the Economy sucks, and we need someone who knows a thing or two about business to get it back in the right direction huh?  Well I have some bad news for you.  You are actually the single biggest problem that we have with the economy.  I’m sorry.  I really do hate to burst your bubble(no pun intended), but it’s voters just like yourself that continue to screw over your own economy time and time again.

The belief that Businessmen know anything special about the economy is the single most successful lie that has ever been purported onto the voters of this planet. It’s understandable why people believe it.  Successful business men have managed to navigate the economy quite well.  Clearly they’ve done better than you so you assume they know something you don’t about it.  Well they might, but it’s not what you think, and it’s not going to help the economy.

In reality letting a businessman fix the economy because he’s done well in it would be like letting a rat fix a maze just because he found his way out of it.  All you’re doing is giving him the ability to construct a hidden route only he knows to insure him and his friends can get through it easily.  The rat has no motivation to help any other random rats get to the end of the maze, particularly not rats that he’s competing with for cheese.

Or maybe a more relatable analogy…what would happen if you let Peyton Manning modify the rules of football?  You may think to yourself, “he’s one of the greatest football players of all time right?  So then he must know something about the game, and how to make it better.”  The problem of course is that Peyton Manning is a quarterback, and the things he tends to find “wrong” with the game are not things that are necessarily problems with the game.  They are simply things that as a quarterback made him frustrated. Things that made his job harder. Things like having all those ridiculously tall defenders in the way of him completing a pass, or having defensive linemen trying to tackle him while he’s trying to throw the football.

These are not problems with the game, they are problems for quarterbacks and fixing them does not improve the game it just makes it easier on quarterbacks.  But quarterbacks like businessmen are just one player on their respective fields, and while you might think that quarterbacks like businessmen are also the most important players on the field you’d again be mostly wrong.  Quarterbacks like businessmen are important, but the reason they have become so important is because the rules of the game have been changed to benefit them.

Rules preventing defensive players from making any contact with receivers at all have turned the game into a pass heavy league. This intern creates the necessity of having a really good quarterback, and paying that quarterback a lot of money.  What is worse is that because the value of quarterbacks has gone up, we now feel the need to add even more rules to protect them. It started with simple things like ruffing the passer, then allowing quarterbacks to intentionally ground the ball outside the tackles.

Over time these additional rules have made Quarterbacks like Peyton Manning so essential to their teams success that they are now “too big to fail.” We now feel the need to put rules in place making it practically illegal to hit them at all.  There’s no reason the game has to be this way it’s just the way that the game has evolved as more rules have been put in place to primarily benefit one position on the field.

The same is true about businesses.  They are just one piece of the economy, and in a well designed economy they’re not actually a very important piece at all.  The problem is that over time we’ve put more and more rules in place to try and help out businesses allowing individual businesses to grow so massive that they now control enormous sections of the economy.  This intern makes them more important as a failure of any one massive business like GM, Citibank, Walmart or McDonald’s causes thousands of people to lose their jobs.  It also gives them so much bargaining power that they can force the workers they do have to accept wages that border on slavery.

This does not benefit the economy any more than removing defensive players would benefit the game of football.  It just makes the game so easy on players like Manning and Trump that they’re barely even required to try any more.  The competition is removed not improved.

Does this mean that a businessman can’t make a good president?  No, not necessarily. Just like Peyton Manning could conceivably make a good NFL commissioner if he can forgo his personal bias towards his old position a businessman could conceivably build a strong economy if he can check his ego at the door and realize that businessman like himself are not the most important part of it.  But when you’re talking about someone like Donald Trump expecting him to check his ego would be like expecting Manning to play running back.  It’s not going to happen.