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This announced auction is a continuation of extraordinary Fed auctions that began back in December and that the Fed expects to continue for at least another 6 months. Moreover, the Fed's actions go a long way to explaining the rise in prices. How so? When you have a greater supply of something, it becomes less valuable in relationship to other things. If it is money that is in greater supply, then it takes more money to conduct an exchange for any other commodity. With the Fed throwing cash at the economy like there is no tomorrow, we're bound to have rising prices. This explains the pain at the pump. It isn't that gas is becoming more scarce and, therefore, more expensive. Instead, as the Fed increases the money supply, money becomes less valuable and it takes more of it to buy gas. The same is true across the board with regard to other commodities. Are eggs expensive lately at the grocery store? How about milk? How about bread? Say thanks to the Fed. The trouble is, while prices are going up, paychecks aren't.
What to do? Apparently, if you are a politician, the answer is to try to find a way to make things even worse. Jeff Rubin, chief economist with investment bank CIBC World Markets, points out that the U.S. presidential candidates all seem to favor increasing one type of tax. Speaking to Canada's National Post, Rubin noted: "If you look at the McCain platform, the Obama platform or the Clinton platform, irrespective of who captures the White House, the next administration is going to impose a price on carbon."
The reason for the imposition of a government-regulated price on carbon (and when is a government-regulated price on anything ever a good idea?) is, of course, to fight global warming. And global warming, all scientists agree, is a substantial problem we must fight, right? Not exactly. Despite the hype, there is no consensus among scientists. As University of Alabama climate scientist Roy W. Spencer points out in his new book entitled Climate Confusion, of 530 scientists surveyed, only "about one-half" thought that climate change is man made. Says Spencer: "That doesn't sound like the science is settled to me."
Naturally, the politicians are going to create a "solution" for a problem that no one agrees actually exists. As you might guess, this is probably a recipe for disaster. Instead of worrying about climate change, we should be worrying about economic change, because government imposed prices, i.e., taxes and tariffs, on carbon are going to make everything even more expensive.
Naturally, it will be Americans who will bear the brunt of the increased expenses. Says economist Rubin: "At least initially, before other carbon-compliant sourcing can be found, it will be U.S. consumers who will have to bear the ... burden in higher import prices."
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