Professor Don Boudreaux's WSJ Letter -- Relearning Lessons From 118 Years Ago

A week or so ago, I made the point, that over the last 50 years, Exxon has probably saved consumers more money than any other firm. Wal-Mart probably wins this race for the past 25 years. At the time I wrote, I had never heard of Congressman William Mason, cited in the letter posted below. Don Boudreaux's letter in today's WSJ shows the extremes of democratic tyranny. It is the human condition that permits us to vote our pocketbooks over our principles. In the 1890's a coalition of small businesses, media and politicians turned the tables upside down and broke up the most efficient large businesses in the name of lowering prices. Of course, the most efficient of large businesses are able to offer the lowest prices. As history shows, politicians sometimes win by attacking a problem with an upside down solution. Today, politicians fight oil drilling in the name of the environment while allowing millions of tons of toxic fumes to spew from coal fired smokestacks.

I am not the first to declare that I do not enjoy fighting my way though a Wal-Mart, but the reason the crowds are there is because the prices are very low. Wal-Mart provides more pay, more social security, and more health care than any other company on the earth. Union organizers, small retailers and all the time lefties continue to attack Wal-Mart. Environmentalist continue to attack "obscene" Exxon profits. History may not repeat but it definitely rhymes. Below is the letter by Professor Boudreaux.


July 14, 2008

Domestic Protectionism

Don Boudreaux

This letter of mine appears in today's edition of the Wall Street Journal:

Edwin Rockefeller accurately describes antitrust proceedings as "the debris of past political demagoguery" (Letters, July 10). Research shows that the 1890 Sherman Antitrust Act was not sparked by fears of high, monopoly prices: Real prices charged by the so-called trusts fell steadily during the decade leading up to the passage of that statute. Instead, that first national antitrust statute was the result of hostility to the low prices charged by the innovative entrepreneurs who pioneered the use of new technologies that, for the first time, enabled individual firms to serve a transcontinental market.

Populist hostility to the efficiency of firms such as Standard Oil filled congressional debate over the act. Congressman William Mason (R., Ill.), for example, thundered on June 20, 1890, that "Trusts have made products cheaper, have reduced prices; but if the price of oil, for instance, were reduced to one cent a barrel, it would not right the wrong done to the people of this country by the 'trusts' which have destroyed legitimate competition and driven honest men from legitimate business enterprises."

Donald J. Boudreaux

The pioneering piece of research to consult here is Thomas J. DiLorenzo, "The Origins of Antitrust: An Interest-Group Perspective," International Review of Law and Economics (June 1985).

Fannie Mae and Freddie

A regular reader writes:

The Fannie/ Freddie crisis is the real need now, that must be resolved quickly to avoid a deep downward market Jack.

Yes and No! The home price down turn started almost three years ago. It is pretty much over, except for the crying. Alarmist headlines are using problems in big cities and resort areas to show that home prices are dropping but the reader who wrote the above recently sold his home at a good price and after only a few days on the market. In fact, home prices are going up in more markets than down. Furthermore, a big decline in energy prices will restore confidence to a lot of potential buyers who are sitting on the sidelines.


The former chairman of Goldman Sachs, our treasury secretary, is using the weak housing cycle as a club to encourage congress to take certain actions. Just a few representatives have been able to stall the housing bailout bills that has passed the house and senate. Incumbent representatives need a few "wins" badly. Ninety-one percent of those polls do not believe congress is doing a good job. More than half believe congress is doing a poor job. These are the kind of poll numbers that can lead to significant election turnover.

Fannie and Freddie are quasi government agencies. The FOMC has opened up the fed window to these firms. Free market competition would be a better system, but the trick is getting over the short term hump. It appears that the treasury secretary will work with congress to develop the appropriate legislation. With most housing markets already bouncing off the bottom, the congress can pass the legislation that will be perceived as "saving the day". Between now and October, a number of "problems" will be solved. The big three will be housing, energy and Middle East War.

My belief is that the three dominoes will fall in the following order, peace agreements, lower oil prices and then a rebound in housing. If I am wrong about the order but right about the events, I will be a happy camper.

Multiple Rabbits Out of Multiple Hats

Pretty soon, a lot of people are going to believe President Bush is a magician, pulling multiple rabbits out of multiple hats. Bush has a lot working in his favor. Can you imagine the difficulty Bush would have had in getting congress to grant 5.8 Billion Dollars in loans to Pakistan? However, the Saudis just announced a "loan" of 5.8 Billion Dollars worth of oil. The Saudis have been bankrolling a list of projects to "buy the peace". With Syria and Israel on the brink of an historic peace agreement, the world has the Saudis to thank. Several pipelines, are helping various nations, including Syria, participate in record oil profits.

Meanwhile, the Saudis are taking in revenues of more than $600 Billion per year. The Saudis have increased production by more than a million barrels per day in recent months. They plan to increase production by another 700,000 barrels in the near future and by still another 1.2 million barrels within a couple more years. They are assisting the west in keeping maximum pressure on Iran, while adding to their US Dollar reserves.


Peak oil my foot. One of the fields just brought on line was mothballed for years, waiting for demand to catch up with supply. At current production rates, the UAE will run out of oil in 92 years. More than 500 billion barrels of Saudi oil are currently not even classified as reserves. In the USA new Bakken wells are coming in stronger than expected. Each gusher raises the estimates for the amount of oil in the USA.

A couple of weeks ago, it became clear that terrorist being chased out of Iraq were migrating to the sanctuary of the mountains of Pakistan/Afghanistan. This week it is clear that they will be given no quarter. About one hundred thousand allied troops are closing in from the Afghanistan side, about one hundred thousand Pakistani soldiers are closing in from the Pakistani side and US Air resources are busy striking targets on both sides of the border, without protest from the Pakistani government. Just a few months ago, the Pakistanis were not in favor of US air attacks, but money talks! The US just lost 9 soldiers and another 15 wounded in a major battle. The only reason for the terrorist to take on the USA in a major battle is an act of desperation. War is tough but the alternative is greater war. The resolve of the US is strong. The support for terror is dying.

Lots of Rabbits

The Bush administration just backed off tightening interstate CO2 rules. So far, environmentalist have hardly let out a squawk. More than 99% of all greenhouse gases are produced by nature, not by man, but this has little to do with the current turn in sentiment. Our congressional representatives have read the latest polls. Only very safe politicians can speak out on the environment when facing a lynch mob carrying a hangman's noose. If a district has the slightest chance of going republican, you better believe the democrat in power is watching this energy question closely. Some are trying to catch up with Obama.

Watching Obama take a hard right has been a sight to behold. A month ago, no one would have predicted such a sharp turn. He has taken a page out of the Bill Clinton campaign book. Bill was amazingly able to run to the right of Bob Dole. Bill ultimately signed off on welfare reform, capital gains tax cuts and NAFTA. He was, in many ways, a "good" republican. Is it possible that Obama will turn into a an even better republican? Not likely, but money talks! In yet another surprise, Obama just decided to support the nuclear agreement reached with India. As reported earlier, nuclear power is ready to soar.

Obama is preparing for a trip to Iraq, in order to reassess his position! He now supports a corporate tax cut. He now supports grants to faith based charities. He now accepts the error of late term abortions. He is suddenly all for the right to bear arms. Before this week is out, he is likely to support drilling for oil. He and other democrats will bargain for silly subsidies for some poor alternative but what is odd about that, even good republicans keep voting for wasteful government spending. Sweet potatoes are a wonderful alternative to corn and since the price of corn is now so high, should we start paying Pepsi to make Frito's out of sweet potatoes? Maybe we should pay a few science friends billions to study using sweet potato syrup to make Pepsi.

Democrats have gone about as far down the peak oil as they can go. Pretty soon, they will have to line up in support of releasing oil reserves.

Stranger Things Have Happened

The Iraqi government is now promoting the democrats argument for a withdrawal time table. I know it sounds upside down but McCain needs for the troops in Iraq to be "the main" topic. If Obama's way had been accepted, the US would have already left Iraq in defeat. As it is, the war is being won. The "new situation" is that some US troops will remain in Iraq after the UN mandate expires. Other troops will be headed home because the war has gone well. The democrats will have a hard time not questioning the legality of leaving the troops there but they will not dare vote to remove them. O how neat it is to see a magician pull a rabbit out of an empty hat!

Oil Prices Will Fall in Two Seconds!

Politicians, airline executives and most everyone else are blaming speculators for raising the price of oil. The irony is that speculators generally reduce the price. The logic is simple enough, if a speculator believes that the price of gasoline will be $10 next year, he will bid up the price this year. The higher the price this year, the lower the amount consumed and the less likely that the price will actually hit $10 next year.

Politicians have learned to repeat a half truth until it becomes the whole "truth". The current democratic truth is that "even if we start drilling tomorrow it will be 10 years before oil prices go down". The "real truth" is that it will take less than two seconds for new drilling to have an effect on the market. A lot of oil is being stored today as a hedge against even higher prices. Once it is clear that new supplies will grow faster than new demand, a lot of oil is going to come out of storage. The pressure continues to mount on congress to pass an energy bill. Non safe incumbents are going to push hard for a bill. We can only hope that a relatively clean bill can be passed. We do not need mandates to force flex cars or hybrids upon us.


Timing is Everything -- Where Have All the Insurgents Gone?

George H. W. Bush won the Gulf War six months too early. He won his war but lost his election to Clinton. George W. Bush has timed his success to perfection, with hardly two seconds to spare. Insurgents have been chased from Iraq in time for Iraqi elections, Iraqi oil contracts and US troop withdrawals before the US elections. The insurgents who escaped from Iraq and into the high mountains of Pakistan are now under attack there. US air assets have been re-deployed. The Pakistani people cannot get a good nights sleep because of the constant drone of the drones. US predators and other UAV's are in the air above the people all the time. Raids on Afghanistan are punished, often in Pakistan. The people of the villages are having second thoughts about providing sanctuary for insurgents because Hell Fire Missiles rain down at the any time of day or night. Terrorist are on the run and finding fewer places to hide.

Wood Stoves and Desalination

Guess what? If the price of oil goes to extremes, the number of wood stoves in use goes to extremes. The dramatic growth in "dirty wood burning" makes true environmentalist, such as myself, extremely unhappy. Why in the world are we encouraging the burning of wood? I love a good campfire as much as the next fellow but the routine use of "dirty wood fuel" in homes and businesses makes no sense. It is amazing that drilling in ANWR is being blocked for environmental reasons while the amount of dirty chemically ladened fumes flowing up from wood stoves is going up, up and away.

At the other end of the spectrum, the high price of oil is spurring the development of nuclear power. A deal was just finalized between France and Libya and another was just signed between the UK and Jordan. Yesterday, a left leaning journalist made fun of the US meekly allowing Jordan to go nuclear while sanctioning Iran for doing the same thing. The journalist is sadly mistaken. Jordan signed on to a new 123 Civil Use of Nuclear Power Agreement. Jordan has agreed to a long list of things that Iran will not; yet. It is easy to understand the logic by which Libya, rich with oil and gas reserves, would want low cost nuclear power. It is easy to understand the logic by which Jordan, rich with oil shale, would want low cost nuclear power. What is difficult to understand is why a nation like the USA has so many people apposed to oil, gas, shale and nuclear energy. Our country has apparently been sold on extremely expensive and generally unproven or unavailable alternatives. We want and expect very cheap and very clean energy.

It is like the question of too much water and not enough water. The alarmist are trying to have it both ways. They say the temperature of the earth is rising (even though the average temperature has gone down for 10 years) and that the higher temperatures are causing the oceans to rise (despite the fact that when floating ice melts the water level does not rise). At the same time, these false rising temperatures are the blame for droughts. The global warming crowd has been forced to re-invent their message so that it is about climate change, this way it does not matter if temperatures have fallen for 10 years, it is all our fault. Among other things, these alarmist ignore the progress being made in the desalination of sea water. There are 7,500 desalination plants in operation. The largest one, in Saudi Arabia, produces 1.2 million barrels of fresh water per day, on par with its highest producing oil wells. The fresh water costs have fallen from around $10 per barrel in the 1960's to around 46 cents per barrel today. A few weeks ago, scientist used nano-technology to build a new membrane that should dramatically reduce these costs again.

One of the good things about desalinating water is that it can be done at off peak hours. As such, nuclear power, which is inadvertently being pushed by those who fight drilling in ANWR, is an excellent source of energy for desalination processes. It would take an enormous amount of desalinated sea water to change the ocean level even an inch but it is more likely that we will begin to dip water from the ocean than to add to it. Perspective is needed, the dirty air produce by the burning of coal and wood should be major concerns; the barren slopes of Alaska will not be greatly damaged by drilling for oil.

Flare Gas

A mandate worth pursuing is one to prohibit flare gas at oil wells. It is estimated that the Fisher Tropsch process could be used to add 4 million barrels of oil per day to the worlds supply while eliminating the burning of that amount in wasteful flares. There are so many causes the environmentalist should get behind. We openly burn the equivalent of 4 million gallons per day while arguing over drilling holes in a barren stretch of Alaska! The problem is that the environmental movement has been subverted into a political hammer. Politicians who vote against drilling in Alaska make no mention of the amount of wood being burned. Do opponents of ANWAR really care about the environment or about being re-elected.

Kindle -- The iPod of Books

I am almost ready to buy a Kindle. I will wait until the distribution tails have grown long and for competition to surface. So far, there are 90,000 books available. Another 130,000 will be available soon. The Kindle gets great reviews; easy to read, long battery life (with WiFi features off), and large storage capacity. With the price per book at around $10, the device represents a great investment for those who read a lot of new stuff. It is my hope to see older and less popular works available on the cheap. The device would be especially good for reference works such as the Bible. Having a word search function available is an especially good feature for reference works. I have been at the beach for two weeks and have gotten a newspaper only one day. At home, I still read the local paper daily, old habits die hard. The dramatic reduction of paper newspapers and books over the next several years will be just one more way to reduce our demand for commodities and energy.

While trees are the most important savings, we should not forget the salt. A prime industrial use of salt is in the making of paper. My how the price of commodities does go down over time! In the old, old days, camel caravans went to China and back to bring salt to the rest of the known world. Salt was a very expensive commodity. Salt was frequently traded for the famous big cedar trees of Lebanon. A highly regarded man was said to be worth his salt. Words such as salad were derived from salt. Before salt was available, who wanted to eat tasteless leaves? Today, we are producing more salt and more trees than we need. We produce so much salt that we only use .001% of our salt in food. We throw truck loads of salt on roads to melt ice. In the years ahead, we will desalinate billions of barrels of sea water while cutting huge amounts used in paper production. Oil, steel and copper are all like salt. They are commodities for which we continue to find cheap alternatives. Fifty years ago, who would have imagined that plastic pipes would be substituted for copper pipes? Fifty years from now, who will bother to drill for oil!

We will never ever run out of oil! The price of oil will fall within two seconds of some catalyst, such as a drilling bill in the USA or a deal with Iran. Iran is witnessing Islamic countries such as Jordan, Libya, Turkey, Egypt and Saudi Arabia go nuclear. Iran wants badly to go nuclear but time is running out. The congress is set to recess by August 8 and it has yet to pass a housing or an energy bill. After promising to hold the spending line, congress just shot massive holes in the budget with its Medicare bill. The approval rating of congress is down to 9%. The public is eager for a positive response. The housing bill has jumped through most of the hoops required. Some in congress say an energy bill can be completed this week, don't hold your breath. Both Iran and the Congress have more than two seconds but not a lot of time to make some deals.

Mandatory Conservation -- Forcing a Teenager to Go to Church

Democrats are making a mistake similar to that of trying to force religion on a teenager. Democrats are coming out in favor of drilling for oil, provided forced conservation measures are included. Put this CD in the player and press rewind! The last time this happened, rebels refused to go along. After the forced conservation measures were passed for cars, the public bought trucks. When will congress learn?

Democrats love taxes because taxes give them the funds to buy votes. They love hidden taxes best of all. It has been a fact for many years that car companies can make cars that get 100 miles or more to the gallon. The cost of these cars would be astronomical or they would be non air-conditioned mini skate boards. The public has not been willing to pay the price. The situation has changed and the public is willing so the congress is ready to be the drum major. The mandates anticipated by the democrats would not produce 100 mile per gallon cars but 40 to 60 miles is a consideration. Using current technology, it is estimated that 40 to 60 mile per gallons cars, such as hybrids, have an economic payoff for the average driver if gasoline goes to about $6.70 per gallon. We are not there and we will not go there. Many of us would substitute a portion of our travel to motor scooters before we would pay $6.70. Never-the-less, the good congress is willing to force religion upon us.


It is a good thing that democrats are ready to drill, under some circumstances. My tirade about the Iranians being like bank robbers caught in the act applies to congress. I am on vacation, it is time to hit the beach, no time to go into great detail but you get the picture. A good analogy is to programs that mandate volunteerism, an oxymoron if there ever was one. When these programs are tried, such as the freshman year at certain colleges, before long there is volunteer point inflation. The student who needs 50 volunteer points credit might be offered all 50 points from a professor who would like to receive 10 points worth of help. At the end of the day, the system was cheated and the student and the professor were turned into cheats. What did the student learn?

The sad thing is that it looks like weeks before a compromise is reached by the democrats and by the Iranians. Democrats understand we need to drill but they will save face by adding mandatory conservation. Iranians know they need to sign on help prevent terror and to use nuclear fuel peacefully but they will save face by seeking special considerations. In the mean time, the markets move forward. A new gas pipeline will take gas from Egypt to Jordon to Syria to Turkey and to Europe. Another proposed pipeline will take gas from Libya to Egypt. Egypt is the biggest supplier of gas to Israel and Syria is set to earn revenue for transporting gas. It is easy to see why Syria is ready to join in the peace agreements. It is easy to see why Syria is willing to cut some of its ties with Iran. Leave people to look after their own best interest, without harming others and good deals will be done. Will the American people cut ties with democrats? Democrats willing to hold high oil prices hostage to political considerations!

Belly Up to the Bar

A regular reader wrote that the new president of WB will make millions within two or three years when his stock options soar in value. He also wrote that CAL would have made big money at $75 oil and a strong economy but it does not look good for oil to go back below $90.

The following is my response.


I agree with most of your comment. I bought WB for a friend yesterday; we are hurting already but we will hold. The congress will pass the housing bailout bill this week or next and a deal will be made with Iraq and with Iran. The outlook for financial stocks could look very different in a week, prices could be up 20%. Obviously, my timing was on CAL was wrong. My only argument is that the $75 "good price" has been moved up to $90 or so. The dramatic cutbacks, bankruptcies and consolidations will make airlines highly profitable at about $90 and the price is going to fall well below $90.

What has proven again is the concept that the size of the tap is more important than the size of the beer keg. The crowd can not get drunk if there is not enough room to belly up to the bar. There is plenty of fuel in this old world but, in the short run, the taps are too small. Investments have already been made to build new saloons and to increase the size of many taps; trillions of investments are underway. Some new taps will flow this year, others next and so on. Hardly anyone believes we will see $70 oil again, I would bet my house that we will.

T. Boone would have the US invest 41 Trillion Dollars to build wind mills. The EIA says we need to invest 20 Trillion Dollars on mostly other stuff. It simply makes no sense to spend 41 Trillion Dollars on wind mills when we have 200 years worth of "enriched coal" available. We need to tap coal, oil, natural gas, wind, bio diesel, tar sands, shale oil and nuclear power. Unless a major break though occurs, the portion of the 20 Trillion to be spent on wind should be small. There are some exciting high altitude wind projects under way but the break troughs have been flowing steadily in the areas of nuclear, solar and microbial production.

Right now, no one really cares that the University of Sidney has just come up with the technology to increase speed of the Internet 60 times. As this technology is developed, it may increase the speed 1,000 times! The "serious news" of the day was about Jesse Jackson and Obama's nuts. The Sidney discovery was hidden deep. This new technology "scratches glass" to separate bits of data at super speed. Those who see gloom and doom forevermore need to make the connection between 60 fold increases in the speed of communication and lower demand for traditional transportation fuels. The Internet is only one of many taps being opened wide. The Internet is a gusher. Those who want to "see the world" can visit streets and neighborhoods today. Google just added a virtual world application. In the short run, these virtual worlds are merely games. In the long run, they will be substituted for actual trips. Add super high speed to remote sensors and every ones heart beat can be affordably monitored continuously.

How will Paris change when ones virtual self can spend a few hours there each evening? It sounds like science fiction it was easy for others to see a different world after Edison invented the light bulb. There is good news in the future, short term and long term. Now is the time to dig deep and to belly up to the bar. Stock prices are cheap.

'Iranian Bank Robbers" Shooting Guns Into the Air

While the "hostage negotiations" continue, the "Iranian Bank Robbers" are shooting their guns into thin air. They do not dare shoot a hostage because they know they are trapped and they fear retribution. If Iran had given up on making a deal, they would have unleashed Hezbollah or Sadr to do mischief. Instead, Iran has been getting a lot of attention by shooting rockets into the air while continuing to try to reach the best deal they can. The US already knew they held the rockets. Firing them into the air gives us kibitzers something to talk about but it will not effect the ultimate outcome. Iran needs to make a deal soon and the leaders know it. In the meantime, more deals are getting done in which Iran is missing "it's piece". A good example is that construction has started on a major gas pipeline from Kazakhstan to China. Such a pipeline is painful to a country that holds 26T metric cubic feet of gas and has a deal on the table to build a pipeline to India and China.

Turkey and Iran have much in common. Turkey is about the same size, has about the same population, is 98% Islamic and it sits on an important land bridge between two whole sections of the world. Important differences include that Turkey is predominately Sunni, it's government is democratic, it is a founding member of the UN, it is a member of NATO and it is working to bridge the divide between the West and the East. Today the Prime Minister of Turkey will travel to Iraq to discuss potential deals.


Tomorrow, the Prime Minister of Israel and the Prime Minister of Syria will arrive at the same meeting in Paris. It is possible that a peace deal between Israel and Syria will be announced at this meeting. Sunnis out number Shiites by a great margin and Sunnis are promoting peace. Commercial deals after more commercial deals are getting done as a result of financial support from Sunni oil wealth. Syria is being "bribed" to switch sides. India has already been "bribed" into agreement. Iran has been offered great incentives to end its support for terror. As a result, the network of active terrorist is migrating to areas like the mountains of Pakistan. The Pakistani government just negotiated a peace with elements of the Taliban. Much still needs to happen in the mountains of Afghanistan and Pakistan but relative peace is at hand in the Middle East. It is highly unlikely that a war with Iran is going to develop. Israel is on the edge of a historic peace with all countries with common borders. The price of oil stayed down yesterday even after the news of the rockets hit.

Making Money Off The Deal

T. Boone Pikens is putting a lot of pressure on the congress to vote on an energy bill. Boone is advertising heavily that he has an energy plan. His plan includes drilling for the abundant natural gas in the USA. Boone helped financed the "Swift Boaters". He is a wily old fox. He knows how to make money. Only in America can a billionaire oil man receive subsidies for building private wind mills, wind mills that are economic jokes. The wind mills being built are 410 feet tall with 148 foot long blades. A single 3 MW wind mill requires 150,000 pounds of steel, concrete and fiberglass. This 150,000 pounds does not include the roads needed to service these monsters. A single 3 MW wind mill requires 60 to 300 acres of land! One of these wind mills is the substitute for about 12,000 barrels of oil per year, a drop in the bucket. It would cost in the neighborhood of 41 Trillion Dollars to build wind farms sufficient to replace the 22% of electricity as proposed by T. Boone! T. Boone likes to talk about the 700 Billion Dollars we spend annually to buy foreign oil. He talks about a 7 Trillion Dollar transfer of wealth every 10 years. That assertion assumes that the oil we buy with the 7T has no value. Buying an asset for fair value is not a transfer of wealth. Using the purchased asset wisely effects ones wealth. It is silly for the government to pay people to build wind mills. Like Russ Roberts says, when the government uses taxpayer dollars to pay someone to do something he would not ordinarily do, the government is paying someone to do something stupid. It is not silly for T. Boone to provide a plan that will increase the demand for US produced natural gas.

T. Boone will make money off building the wind mills and off the production of natural gas but taxpayers will pay. The only way the taxpayers wins on this deal, ironically, is if it pushes congress to stop distorting the free market. Wow! Dick Durbin, majority whip, and Harry Reid, majority leader, have each come out in support of drilling. They had to come out in support because it has become clear that enough "Blue Dog Democrats" are behind drilling that no energy bill can make it through the congress unless it includes support for drilling. The fix is in! Congress is scheduled to adjourn by August 8. An energy bill should pass before the congress leaves town.

Yesterday, the congress got the FISA wire tapping bill out of the way. When democrats took control, it appeared that the US would be forced into a quick defeat in Iraq and that electronic surveillance would be limited by law. While the left is distraught over the passage of FISA, the average American is all for giving our government the tools it needs to capture "the bad guys". Many on the left cannot understand what just happened. The Bush administration threatened to beat the congress over the head with the details of prevented terrorist attacks. It is best for these details to remain classified. If authorities are not allowed to function anyway, then the details could have been used to bolster the administrations position. Democrats were simply on the wrong side of the issue, just as they are on drilling, taxes and Iraq.

As noted before, Obama has been tripping over himself to get to the "centrist middle". An Obama administration will not be greatly different from a McCain administration. With the exception of supporting a strong military, Bill Clinton was about as republican a president as we have seen in some time. Bill Clinton governed to the right of Nixon and Bush (again with the exception of the international area). Even Obama's proposed increases in taxes will have a tough time getting past a congress that includes "Blue Dog Democrats".

Change is Constant

Mercedes plans to be a "zero petroleum" car company within 7 years. Obviously batteries, capacitors and fuel cells will play a part in this "zero petroleum" push. The ability to transport natural gas around the world is being significantly increased by the building of new gas pipelines. Abundant electricity will be used to run "appliances" to convert natural gas to hydrogen for use in fuel cells. (Honda has built fuel cell "stations" in California.) Batteries will be leased out and changed out in a fashion similar to propane gas canisters. Exxon is selling all of its service stations. Are the days of the traditional service station numbered?

The FDA approval, yesterday, of the INTC health monitoring service is the kind of "invention" that will change our world. The elderly and infirm will be able to live at home while having their health under constant survey. Those with high blood pressure, diabetes and other "health maintenance problems" will receive superior care without traveling to and from doctors offices. If we really want to cut the cost of health care, we will stop paying for nursing home care for those who would prefer to live at home. The cost of nursing home care is upwards of $6,000 per month! It will soon become common for children and everyone else to wear communication bracelets or necklaces. Parents will be able to know exactly where their child is at all times and both parent and child will be able to push a button to communicate. Home schoolers are spending computer time to connect with the best teachers and resources in the world.

The world is changing and change is good. We simply must be careful not to go backwards in the name of change.


World Wide Recession or Slow Down

In the USA, Europe and Australia, the people spend less than 25% of their income on food and fuel. In the bulk of the world, more than 25% is spent on these necessities. Since the central bankers of the world are not flooding the world with currency, our "inflation bath tub" is no where near running over but there are big swells and waves in it. The decline in real estate values is being matched with extreme spikes in food and fuel prices. The spikes in food and fuel are crushing those who live in the "bulk" of the world. The people of India and China are being forced to cut back on fuel consumption in order to eat. As a regular reader mentioned, a lot of people will forgo a long distant vacation this year.

It has been difficult to see how the world would enter an economic slow down with so many enormous gains from globalization and technology happening daily. Even the most recent numbers show that business capital spending in the USA is super strong. The good news is that the market will move up long before the worst of the slow down. Lagging indicators, such as high inflation and spikes in unemployment, occur just at the bottom of the stock market. Falling prices are, ironically, good for stocks. The price of every thing from corn and copper to gold and oil have peaked. This week, what happened? Iran shot up rockets in the air and the price of oil went down! A couple of weeks ago, a report about Israeli air maneuvers that had happened weeks before, caused oil prices to jump. Yesterday, oil inventories were down, capacity utilization was down but gasoline supplies were up! Refiners are not eager to buy crude at high prices only to find that they cannot sell the gas at a profit. Has there ever been a bigger fall off in gas guzzler sales?

The time to be the most optimistic is when others are not. That is the situation today. Trying to catch the bottom of this market is a mistake. It will be a V market. The new leaders will jump 40% on value before the average investor even realizes a market rally is in place. The decline in the old leaders will mask the market move. Hang in, stay in and add in to make money now! All the bank robbers have left in their arsenal is guns to shoot in the air, they are past the point of being willing to actually shoot at a real target!