Capital controls, here we come

It must be an election year.  Senator Lieberman is trying to pass legislation to discourage speculation in crude oil.  It's those greedy speculators that are driving up the price of oil.  So if he has his way, pension funds won't be able to invest in oil.

Trouble is, it's not just oil that's going up.  It's also natural gas, silver, gold, copper, tin, zinc, aluminum, iron, lead, corn, wheat, soybeans, and just about any other commodity you could name.  The real problem is that it's not these commodities going up as much as it is the US dollar going down.

That's how we protect ourselves from the depreciation of our currency; we buy stuff that might hold its value.  A year from now, I expect the price of oil, gold, silver, and anything else tangible to cost more because the government is increasing the money supply at the rate of at least 16% a year.

Maybe Senator Lieberman and his colleagues in Congress and the frat boy in the White House could start spending our money as though it were THEIR money.  Then they wouldn't have to monetize the debt that foreign central banks have finally learned not to buy.  We've only been running this scam for 37 years, but they finally figured out there hasn't been anything backing our dollars since 1971.

I happened to be in England in August, 1971 when then-President Nixon dissolved the Bretton Woods agreement, and decided to let the dollar float.  He really didn't have any choice.  Those dastardly French suspected that gold was worth a lot more than 35 of our dollars, and started demanding payment in real money.  Fort Knox would have emptied in a hurry (which it probably is anyway, but that's another story) if Nixon didn't close the gold window when he did.

But I digress.  As we enter the Way Back Machine again, it's August, 1971.  My dad was working in England on business, so I spent six weeks there.  But when the dollar floated (i.e sank)our money was no good.  For a couple of days we had to eat all of our meals in the hotel restaurant because no one knew what a dollar was worth.  We didn't have a lot of local currency, and we normally charged meals to a company credit card, but the good people at VISA had no idea how many dollars a British pound was worth.

So here we are again.  We have lots of dollars; we just can't use them to buy anything useful, like for instance oil.  So take my advice and buy oil, gold, silver and anything else of value while you can.  Because soon these things will be rationed, and with rationing comes shortages.  Tried to buy a Silver Eagle from the US Mint lately?

I agree with Bush

Anyone who reads this blog has probably figured out by now that I have no love for George F. Bush.  But for the first time in seven (7) years,  I agree with him.  Specifically I agree with his decision not to tap the Strategic Petroleum Reserve.  Congress actually only wants to stop adding to it, especially with crude oil at all-time high prices.  Bush has threatened to veto the legislation.

The SPR is there in case of emergency.  Our economy runs on oil, and if there are shortages, it will come to a grinding halt.  It is appropriate to use the SPR if we're at war.  If an oil tanker is sunk in the Strait of Hormuz, that's an emergency.  If a hurricane wrecks the refineries on the Gulf Coast, that's an emergency.  $4 a gallon gas is not an emergency.  "It costs too much  to fill up my SUV or Hummer" is not an emergency.  If you use the oil when gas is $4, you won't have it next year when gas could be $7.  Of course next year isn't an election year, which is what this is all about.  If you're really concerned about high gas prices, buy some shares of UGA to lock in today's gas price for the rest of your life, and from then on you'll smile every time you fill your tank.

One more thing on the SPR:  I'm aware that filling it at all-time high prices is not cost effective.  But if you give the government the latitude to decide exactly when to buy the oil, I know exactly what will happen.  Goldman Sachs will make lots of money trading oil futures, and the crude will cost the government even more.

There, I said it.  I agree with Bush.  It's the first time in seven years, and I don't plan to make a habit of it.  He's threatening the veto for all of the wrong reasons of course.  Gotta remember, he and Dick (conservation doesn't work) Cheney are oil men.  They don't have to run for re-election, and a high oil price helps their buddies in the oil patch.  But filling the SPR will be important in the times of shortage to come, so for once in his life, Bush was correct, even if he did it by accident.

Good bye zinc standard

Today the House of Representatives voted to change the composition of the penny.  It seems zinc is too expensive to use to fabricate pennies.

There was a time when this country was on a gold standard.  Coins were 90% gold.  From the $1 coin to the $20 double-eagle, the bigger the coin, the more gold it contained, and the more valuable it was.

There was a time when our money was redeemable in silver.  Those banknotes in your wallet stopped saying "silver certificate" a long time ago.  Now they are federal reserve notes.

Until 1982, our pennies were made out of copper.  Then copper became too expensive, so we had to switch to zinc.  Fast-forward 26 years, and now even zinc is too expensive.  So the House passed legislation directing the U.S. Mint to start producing pennies made from steel within the next nine months. 

The Senate hasn't taken up the matter, so it isn't a done deal yet.  Rep. Space (that's his real name) of Ohio said it was an insult to the taxpayers that we are spending more to produce coins than they are worth.  His legislation would save us $1 billion over the next ten years.

I think the much larger insult to the American people is that our money isn't worth anything any more.  At least now we can save pennies and nickels that have real value, based on the copper, nickel and zinc they contain.

We made pennies out of steel once before, in 1943.  Of course we had a good reason back then.  We were trying to win World War II.  I don't mind the government running deficits and spending money excessively if the future of civilization is at stake.  What is our excuse now?

Back in 1943, for one year the pennies were gray, and they really stand out.  This time, our pennies will be copper-plated steel, so they will still look the same color.  Haven't we seen this before?

In ancient Rome, the denarius was made out of silver.  But during the reign of Nero (the one who fiddled) they debased the currency, reducing the silver content.  This continued under bad emperors and even good ones who liked to fight expensive wars (Trajan) so by the third century AD, the coin was renamed the antoninianus, and it was made of bronze.  But to maintain appearances, it was coated with a thin wash of silver.  Not that this fooled anyone.  The coating wore off very quickly, and everyone knew the coins were made of bronze.

Rome very nearly fell in the third century, and only a succession of army-emperors saved it by turning it into a virtual police state, run by bureaucrats who deprived their subjects of whatever freedom they had left for another two centuries until the whole rotten structure was finally (and deservedly) overrun.

Is that our fate?  It depends on our leadership.  They say God looks out for babies, drunks, and the United States of America.  Instead of hoping for divine intervention, it is time to make hard decisions and accept that we need to pay $8/gallon for gas like every other country in the world.  That we need more doctors and more access to health care.  Most of all, we need to live within our means, instead of living off the savings of the rest of the world.  Good luck finding a leader who will say those things to the American people.

The worst day in retirement

The worst day in retirement is still WAY better than the best day at work.  I have just passed the first anniversary of my retirement.  One full year of not having to brief pilots who don't know what they're flying, or where they are, or where they want to go, and don't know how long it will take them to get there...but they want a standard weather briefing.

I admire people who derive satisfaction from their job, and find their work too challenging to quit.  Especially those guys who say they can't conceive of themselves being retired, because they wouldn't know what to do with themselves.  I salute all of you, because if everyone retired like me, the whole country would grind to a halt.

Another good reason to retire came last week (April 21, to be exact) when Lockheed Martin held a pilot's meeting at Oakland Airport to promote the abortion they call FS21.  Of course I didn't go to the meeting; since I retired my BS tolerance isn't what it used to be.

They had room for well over a hundred people, but a grand total of 13 pilots showed up.  There were 19 people there in total, but 5 of those were from OAK AFSS, and 1 was a non-combatant (the spouse of a pilot.)  From what I have been told it was a complete waste of time...the oily LM/former FAA guy who hasn't worked at a station in 20 years trying to convince everyone things are getting better.  He would probably have had a better chance of selling the Golden Gate Bridge, but that's just me being cynical again.