OpEdNews » Oil and Money; No Easy Way Out:

Tags for This Article:

Populum Tag Cloud Control Panel
	Fine tune your search to access content

Articles	Links
Diaries	Products
Events	All

All time
Last 6 mos
Last month
Last week
Last 24 hrs

From:
Month Day Year

To:
Month Day Year

Alphabet Popularity	Count ON Count OFF
This Level	Sub-levels

Tag(s): Federal Reserve; Inflation; Money; Oil Cost Of $$$; Oil Demand Supply; Oil Foreign Ownership; Planning
Add to My Group

June 2, 2008 at 09:58:02

Headlined on 6/2/08:
Oil and Money; No Easy Way Out:

by Mike Folkerth Page 1 of 1 page(s)

www.opednews.com

SAVE FAVORITES

VIEW FAVORITES

View Ratings | Rate It

The subject at the coffee shop, the office, down at the garage and around the kitchen table these days is oil; more correctly, the cost of oil. But most of the information being passed around is incorrect. Just yesterday I was told that there are more than 200 years of oil left in Alaska alone. That all of the oil from the Alaska Pipeline goes to Japan. And, that every oil container and tank in the world is so full that there is no place left to store it. I was also told that once the election is over, “they” will do something about these oil prices.

I figured that I may as well join in the conversation, so I threw in that Santa Clause was coming twice this year and the Tooth Fairy is cornering all of the world gold reserves. I expect my input to be repeated by tomorrow as the gospel and coming directly from an undisclosed, but reliable source.

During the conversation, I never heard anyone say that oil is finite and that using 86 million barrels per day could potentially create a shortage. Nor that we have been warned about an energy shortage for more than 50 years and failed to plan.

My personal opinion of why I don’t hear the truth being bantered around nearly as often as the fables is that the thought of oil running out in a country that runs on oil ain’t something that most folks care to ponder for any length of time. Doing so gives a body the same kind of headache as trying to determine how the universe could be infinite. And thinking about that is what made Albert Einstein’s hair stick out.

Over the years I have observed that anything that appears to be life altering is side stepped like a coiled rattler. Our government is no different in that respect and our method of planning has therefore become known as “The Advanced Method of Crisis Management.”

Our monetary system is in every bit as much crises as oil. The Federal Reserve was a bad idea in 1913 and isn’t getting any better. Our physical system (that of matter and energy) must be balanced with our monetary system to operate long term, but it’s not, printing money is infinite.

I often refer to M. King Hubbert, the American geophysicist (October 5, 1903 – October 11, 1989), who pointed out as early as the late 20s that, “A reasonable co-existence (between our physical system and our monetary system) is possible [only] when both are growing at approximately the same rate.” In other words, as resources and population stabilize or go into decline, we can’t continue to print more money…but we do.

Mr. Hubbert also pointed out that charging interest at any rate above zero automatically creates the necessity of exponential growth in the money supply. We call it inflation.

Lets look at Mr. Hubbert’s claim that charging interest simply won’t work out mathematically long term. We’ll do it with Mikemathics so that even Mike can understand it. Say that you and I both have $10 and you loan me $5 at 10% interest. In a very short time you would have $20 and I would have zero from paying you interest; that is, unless someone printed more money.

If you deposit $1000 in a savings account and after a period of time your money grows to $1500, where did the $500 come from? It came from one of two sources, either someone else got poorer or the Fed printed some more money.

Following this system through, there are two possibilities. One, those who had money to loan would eventually have all the money from collecting interest. Or two, there would be hyperinflation from flooding new money into the markets to match the interest being paid. In the U.S. we chose a little of each.

Digressing for just a moment, I have determined that there are two ways of arguing with my wife; neither one work. Our monetary system follows this same pattern.

Here’s a flash, 20% of the people in this country have 80% of the money. Dr. Hubbert was right, wasn’t he?

www.kingofsimple.com

	Contact Author
	Contact Editor
	View Other Articles by Author

Bookmark this page: (what's this?)

(More...)

5 comments

Mike Folkerth is the author of "The Biggest Lie Ever Believed" and is not your run-of-the-mill author of finance and economics.

The former real estate broker, developer, private real estate fund manager, auctioneer, Alaskan bush pilot, restaurateur, U.S. Navy veteran, heavy equipment operator, taxi cab driver, fishing guide, horse packer and few jobs too embarrassing to mention, writes from experience and plain common sense.

Mike’s humorous systems of “Mikeronomics” ...

to see more of bio, click on member name
Mike FolkerthMike Folkerth is the author of "The Biggest Lie Ever Believed" and is not your run-of-the-mill author of finance and economics.

The former real estate broker, developer, private real estate fund manager, auctioneer, Alaskan bush pilot, restaurateur, U.S. Navy veteran, heavy equipment operator, taxi cab driver, fishing guide, horse packer and few jobs too embarrassing to mention, writes from experience and plain common sense.

Mike’s humorous systems of “Mikeronomics” ...

to see more of bio, click on member name

the rich rule

The golden rule of the rich is "He has the gold rules." I was actually generous in my article in terms of who holds the wealth in the U.S.

In financial wealth, the bottom 80% only account for 8.8% of Americas money.

In total net worth, the bottom 80% account for approximately 15% due to equity in home ownership.

So to the point of my article, the top 20% control 91.2% of the money that bears interest or collects dividends.

by Mike Folkerth (120 articles, 0 quicklinks, 2 diaries, 566 comments) on Monday, June 2, 2008 at 5:02:05 PM

64 year old retired factory worker. Lifetime democrat; now a member of the Ron Paul revolution.
ronheri64 year old retired factory worker. Lifetime democrat; now a member of the Ron Paul revolution.

Federal Reserve=Head of the Beast

The Federal (not Federal) Reserve (no Reserves) foreign owned banking cartel must be elimanated. It has been the cause of all of our monetary problems since it was snuck through a sleeping Congress in 1913. Woodrow Wilson admitted as much, declaring afterwards, "I fear I have caused the ruination of our great country by allowing the bankers to control our money supply". Presidents who have attempted to return our country to a stable gold or silver back system which we control, have been assasinated ;Jackson, Lincoln, JFK. Rothchilds, Warbergs, Rockefellers, assorted Kings and Queens around the world. The Illumanitti=the most evil force on the earth. They wish to destroy America, and are well on their way to success. Only Ron Paul was brave enough to speak of this evil. It must be cut off. All Federal Income tax goes to pay interest to this scum.

by ronheri (0 articles, 0 quicklinks, 0 diaries, 150 comments) on Monday, June 2, 2008 at 8:29:01 PM

American Expat in Asia
pftAmerican Expat in Asia

Oil vs Money

The fact of the matter is that nobody knows how much oil we have. Certainly, oil must be finite. How much oil we find is a function of money invested in finding it and motivation for increasing profits. If finding more leads to reduced profits, there is not much motivation to report what you have found. There is an optimum level of supply vs demand that maximizes price and profit. I contend supply is being manipulated, and also that much of the price increases are as a result of unregulated future traders who never have to take delivery of a single drop of oil.

But lets get back to money. Unlike Oil, money is not a finite commodity. In fact, most of our money does not exist in a physical form. It exists on an excel spreadsheet, a database, a balance sheet, but it never gets printed up. In fact, with M3 at 16 trillion dollars, we have 800 billion in printed money, only 300 billion in the US.

Where is the link to oil here?. Oil is being consumed at the rate of 32 billion barrels per year. At todays prices, thats 4 trillion dollars per year. Assuming 1/2 of it is being exported thats 2 trillion dollars. Since oil is being traded in USD, then one can argue that demand for USD relative to when oil was priced at 30 dollars a barrel has increased by 1.5 trillion dollars per year.

Where is the additional money coming from to buy this oil. Some of it out of savings, some is borrowed, some coming from central banks reserves. But it is money that is taken away from the rest of the world economy that could be used for food, infrastructure development, etc. Thats not good.

The great hoax of the 20th century is that governments must borrow money from a private banking monopoly like the Fed, by printing up bonds that are purchased by the banks with money that THEY create out of thin air. Then for every dollar the government can spend from borrowed money, the system can then create 10-30 times more money by issuing loans which earns them trillions in interest.

Today we have China loaning us money with dollars that were created as above. The Fed prefers CDO's now since we make them return the interest on our bonds, no fun for them, so they take the garbage off the Fed shareholders investment banks balance sheets, and give them real money that they create out of thin air.

So where does the Chinese government get the money to loan us? Of course, you say, we sent it to buy the exports of their manufacturers. But the manufacturers are not the government, and they can not use these dollars to pay their taxes or workers salaries, so they need to exchange the USD for RMB with their governments bank. So China, prints up their RMB, money created out of thin air to buy the USD from their factories.

In other words, we let China print up RMB to buy USD and loan the USD to us, and we pay them interest, when our government could be printing up their own money, debt free, like Lincoln did, and building infrastructure, paying for health care, even paying for our military.

So where is the oil connection?. Look at it this way. In the US/Canada/Mexico (we have been secretly merged), we have a lot of oil that is not being extracted or even listed as proven. Consider the Bakken Formation as one example

http://www.nd.gov/ndic/ic-press/bakken-form-06.pdf

Dr. Leigh Price who worked for the USGS had sent out a paper for peer review in 1999, estimating the oil in Bakken, which runs from ND to Montana into SE Saskatchewan , had as much as 200-400 billion barrels of oil, based on a 50% recovery rate. He died in 2000 while exercising before the peer review was completed, so his paper went unpublished, but was seen by some of his peers who were reviewing it. Requests from USGS to release it are denied, since they argue it did not complete the peer review process, and this is againat policy to release unpublished studies, even though we the taxpayer paid for the study. They have just last month estimated the Bakken Formation as having only 4 billion of recoverable oil. This is 1/2 year consumption, as opposed to 40 years if Leigh Price was correct.

He was in his 50's, and from all accounts, in great shape, and the price of oil has increased from 20 to 125 dollars a barrel since his death. Maybe coincidence. Little Oil would be all over Bakken. But Little Oil is dead as a dinosaur, killed by the low oil prices of the late 80's and 90's. The Oil industry is no longer anything but a cartel free of competitive forces that all good capitalists despise.

This is anologous to the Fed today not wanting to print he money themselves to loan to the government, and the government not wanting in print it's own money. Instead, we let foreign Central Banks do it. In effect, we import the money we need and pay interest, which is inflationary.

Big Oil imports oil, which is also inflationary, since it floods the overseas markets with dollars. This helps devalue the dollar by increasing oil prices, and high oil prices cause domestic inflation. The high oil prices make what's produced domestically more profitable, and also, Big Oil is getting some of the action overseas by servicing the Oil producers.

The link between the solutions for our monetary system and oil is that money creation, and oil production, need to be nationalized. Government should be able to create the money they need to spend domestically without interest. Thye need to limit the money creation ability of the commercial banks who prefer to create for loans to the proprietary trading desks of Investment Bank, both being owned by the same Holding Company, who then use the money to speculate on commodities or whatever is the bubble of the day.

At the same time, National Governments need to take back their oil from the Oil Companies who are essentially Global Oil Cartels. We can pay them with money we create out of thin air. Oil will then be sold at cost. We can then rebuild our physical economy and reduce reliance on imports and GDP growth from fictitous capital, that profits mainly the rich and generates few good paying jobs relative to manufacturing (The CEO's and top executives earn billions, not so much at the lower levels).

by pft (0 articles, 0 quicklinks, 0 diaries, 466 comments) on Monday, June 2, 2008 at 9:21:15 PM

Wolfie

BY JOVE , I'VE GOT IT!

The entrepreneurs must risk their Kapital in order that you may purchase

their commodities and services at a free market price.

You just don't get with the program, you twerp!

Anybody can go drill for some oil and ship and refine it and distribute their

product to John Doe. It is so simple, why are you arguing with a perfect

mechanism to bring us the lowest prices obtainable?

Just start looking for that well, and soon you will be well off!

by Wolfie (8 articles, 0 quicklinks, 31 diaries, 1184 comments) on Tuesday, June 3, 2008 at 1:28:34 AM

pft

Not sure where you got the MP3 number as it is no longer available. The correct amount of oil consumption per year globally is 30,660,000,000. If you think oil is high now, try nationalizing it and let the government run on the profits.

The U.S. imports 75% of our oil and 70% of world oil is already Nationalized. Even the spin doctors in Washington are beginning to get it.

Wolfie said it correctly, you just don't get it.

by Mike Folkerth (120 articles, 0 quicklinks, 2 diaries, 566 comments) on Tuesday, June 3, 2008 at 7:48:37 AM