Mailvox: yes, it is

TH questions my logic: That’s logic? First, the notion that American doesn’t have to pay blood for oil when it can just print money is daft. Printing money at will by America would only make the dollar worthless. Of course, in Mr. Day’s view, paper money is worthless anyway because America has been taken off the gold standard. This completely misses the point that neither green paper nor gold have any inherent value other than what humans place on them. Sure, gold can be made into pretty things and is difficult to find. That wouldn’t matter if people hadn’t already accepted it as a measure of wealth and currency of exchange. As long as paper money is commonly accepted as legal tender for the payment of goods and services, its value relies on the same laws of supply and demand that govern the ‘price’ of gold. Print money at will, and soon people are carting wheelbarrows of cash to buy their daily bread. It wouldn’t be any different if all exchanges were handled in gold coin and the Himalayas were suddenly discovered to have a solid gold core covered by a thin layer of granite.

First, as the financial expert Firestarter points out: “The vast majority of the cost of foreign oil is paid in US government bonds. Essentially an IOU for billions with a coupon (interest) rate of just 1% p.a. Since these bonds can literally be printed by the US government at no immediate cost beyond the coupon rate, oil can essentially be bought for next to nothing. The long term costs of such a policy are price inflation and/or the deflation of the $US, proportional to the value of money supply “created” by such a policy. We have already seen the devaluation of the US$ by some 35% and the escalation of asset values world-wide as a consequence.”

Following on to this, I note that the Fed created $48 billion last week, which is enough to pay cash for 1.12 billion barrels of oil at $42.50/barrel, significantly more than the 70 million barrels we use every week. Since January 20, 2004, the M3 money stock has increased by 3.3 percent to $9.1 trillion. That’s $300 billion dollars printed in four months.

In other words, the situation is precisely as I described it. Unsurprisingly, TH went on to try arguing that the 10 billion barrels in ANWR will only allow the US to go without importing oil for 2.5 years, of course, he ignores the tiny little fact that the whole point is to allow us to go without importing any ARAB oil, which drilling in ANWR would let us do for around 15 years, 30 if we were content to reduce our Arab imports by half.

So, thank you, TH, for underlining my point about the ignorance of American left-liberals.