Dear John: I think I read in a recent Sunday New York Post a tiny item that said that for the first time since 1973, the United States is about to export oil.
But on Friday, I saw reports that because of problems in Iraq, New York drivers can expect to pay $5 per gallon of gasoline.
Come again? J.R.
Dear J.R. Poor you. You seem to be stuck on the notion of supply and demand. How old- fashioned of you.
Because of improved oil-gathering technology like fracking, the US is indeed greatly expanding the amount of oil it produces.
And we now have so much oil that we might even be able to sell some to less fortunate countries.
That, of course, would be good news. That’s what we’ve been hoping for all these years.
But, sorry to say, the law of supply and demand seems to have been repealed by Wall Street just before all this good news came out of the US oil industry.
And let’s not forget that car technology has also improved.
Electric cars are more viable and vehicles with hybrid engines are no longer a novelty. They are all over the place.
Too bad the law against technological improvements was also repealed by Wall Street.
Nowadays, it doesn’t matter how much — or little — gasoline you use.
Or how many barrels are being jostled out of the ground.
All that really matters is how high speculators on Wall Street can push the price based on geopolitical events happening around the world.
Imagine a time when the world doesn’t need gasoline at all — when all cars run on electricity or hydrogen or the emissions from human waste (or whatever else they can come up with).
Those same speculators will be working on Wall Street, trying to convince us that prices should go up because one group is bashing in the heads of another group in the Middle East or some other far-flung location where light, sweet methane is bubbling up from the ground.
It’ll be like trying to bet on a baseball game in January: There’ll be no action on the field, but the bets will still be coming in.
Dear John: Your definition of “deflation” is incorrect.
Deflation is not prices going down. Deflation is a decrease in the money supply which results in prices going down.
Just as inflation is an increase in the money supply which results in rising prices.
If you don’t know what something is, you can’t possibly know how to combat it.
If inflation is an increase in the money supply, how can the money supply increase and tighten at the same time?
The people who are causing inflation are the people controlling the central bank, i.e., the Federal Reserve.
I am not an economist. I’m a construction worker whose hobby is economics.
This stuff is not that difficult. “End the Fed” will become a reality. Harry from Pa.
Dear Harry from Pa. Well, aren’t you a smarty pants!
And since you typed this note on an old-fashioned typewriter, I’ll assume you don’t understand the complications that have clouded the old-fashioned version of “money supply.”
It’s no longer the amount of liquidity the Fed is pumping into the financial system.
If only it were that simple.
“Money supply” today includes all the make-believe money that the Fed is creating through quantitative easing — essentially digitally printing money to purchase bonds and mortgages.
This digital money is then on top of the what we used to know as money.
And then there is the wealth effect from the bubbling stock market. When stock market profits are eventually liquidated, that will create another source of liquidity for the market.
So, while I always appreciate a wise-ass note, I suggest that you consult a more current textbook when you want to discuss economics.
I don’t know anyone who has been more critical of the Fed than I have. But to suggest that this country doesn’t need a central bank is idiotic.
Happy plumbing.
Dear John: I’m responding to the reader whose question appeared in your column recently. New York State Finance and Tax Department are correct, I’m sorry to say. Out-of-state tax-free bonds are only federally tax-free and need to be included in state taxable income.
All municipal bond funds need to be broken down by percentage of how much of the dividends are in state and out of state.
The questioner was entitled to take a capital loss of $13,000, although he’d need to stretch it out over five years because he can only take a $3,000 maximum loss per year. S.K.
Dear S.K. Thanks for the additional information