Keep Armenia in Your Thoughts

I am sure all of you have heard about the conflict in Georgia (the country not the state) involving Russia and separatist groups.  We have a mix of reports and earlier today I was not able to reach anyone in Armenia via phone.  However, people in Armenia are safe as Armenia has a very good relationship with Russia.  However, most of the natural gas and much of the trade routes are through Georgia.  Armenia will receive collateral damage.  There are already reports that the gas pipeline has been destroyed in Georgia.

The Southern Caucacuses, much like many places in central Asia, have many different ethnic groups living in very close quarters and they have never liked each other much.  While I do not forsee the Georgians and the Armenians entering into an armed conflict, both economies will sustain damage should trade routes be cut off.

Keep those in Armenia in your thoughts.  Most of us take peace and security for granted but as we can see that in the process of 96 hours that cities can be destroyed and many displaced.  I hope that Russia will pull back but I do believe that Moscow wants to remove the pro-western government and replace it with a puppet.  Let’s hope for a positive and quick change of direction.

The Oil Debate Part II

This is a quick follow up to the article I posted a few days ago where I insulted Congress and a PAC that was formed to build support for drilling for new sources of oil.  I have been delighted at the response of the readers!  Thank you to all who have expressed your opinion via email and thanks to my two lovely aunts who took the time to post comments.

First, I would like to clarify something.  I am as pro business as they come.  I think Adam Smith is a god.  I believe government intervention in a free market is counter productive.  I believe government should be there only to protect personal freedoms and to help those who cannot help themselves.

I will start with Aunt Mary’s comments.  She brings up valid points about regulation and that until recently the cost of regulation out weighed the cost of production hence the limited expansion and development of refineries.  Energy independance will not come through more capacity.  Think of the problem like having your grandchildren in your house after you make your awesome Christmas cookies.  No matter how many you make, they will be eaten.  However, if you wanted to reduce consumption of the cookies, would you make more?  My example is a strawman fallacy but it begs the question; how do you reduce consumption?

Amazingly, in the time gas has struct the $4 mark, American have driven over 1.4 Billion miles less than previous time periods.  Many of the best economists have said to reduce the price of gas the price must climb.  There is tremendous inefficency in the system (personal cars, lack of public transport, etc) and until those inefficencies are removed the price of gas will continue to climb.  Ironically, the change in behaviour has been so dramatic in the past six months coupled with the increased exporting of fuel by Saudia Arabia due to GW’s begging, we have seen a reduction in National prices.  However, in Europe especially here in Britian fuel prices continue to remain high.  In Bristol, people are playing $9 a gallon and it is clear there are inflationary pressures as every product we buy has gone up at least 10% in six months and today my bus ticket went up 8%.

To address the business issues mentioned by many people, business must change with its environment to remain competative.  Sadly, small business tends to feel the pressure the most.  Agreed farmers have it difficult but at the same time as mentioned by my Aunt Dorine there are a large subsidies for farming that cannot be ignored.  It is interesting to talk to some farmers to realise how many are putting thought into technology that can reduce their costs.  If farmers do not innovate or for that matter any businessman, the business environment coupled with competition will render the business ineffective and unprofitable.  I am not picking on farmers but there are a lot of farmers who read this blog and I did get an ear full of comments.  Energy and farming is a difficult topic and not one easily summed up in a tongue and cheek article such as this.

A couple of people who are unabashadly liberal stated that they are excited for high gas prices as it will force a change in the definition of the American lifestyle.  I am not sure I am that optimisitic about high fuel costs but it is very interesting to see how economic pressures are demanding change of the public.  Think of how your life has changed and what you are doing differently because of the surge in energy costs.  This is the biggest shift we have seen in some time in American culture.

My point with my original article is that drilling is a long term solution that will be proven too late and too expensive.  It will be years until any new capacity would be in the market and by then energy markets will be drastically different.  Some Americans are sheep in that they believe a policy made in an election year will have material impact.  I hope all of you realise the farce in these promises and arguments and recognise them for political propganda.  In the end, big oil wants more profit and is not competing in a free market due to government intervention and regulation.  I am anti-big oil because they do not play by the rules of basic economics and use tools Adam Smith never dreamed of to win favour.

If you are a history buff, you will know the car lobby started just after World War II working to reduce that which would make us energy independent.  They squashed the electric car, the elebroate tram systems in most every moderatly sized towns, pushed for the adoption of surburbia and low density development, advocated building roads into such places of great natural beauty as Yosemity and the Blue Ridge National Forest, pushed for the removal of the railways, etc.  I am not anti profit and I am not anti business.  I am against wrapping a wolf in a sheep’s clothing.  Be sure the solution fits the need and that change and innovation is the only way forward.  More oil is not a sustainable solution and I challenge anyone who can give any theory or model evidence to show how the current energy plan as offered by McCain and his Republican party oil barron friends will make a real impact in everyone’s daily life.

In conclusion, thank you to everyone who shared your thoughts.  The only solution as one of my wise friends pointed out is a rapid change of lifestyle where people choose to live a bit more austere lifestyles.  As always, if you would like to express yourself, send me an email or use the comments below.  It would be a joy to read your thoughts.  Thanks again to my Aunt Mary and my Aunt Dorine for posting great comments!  It is much appreciated.

Food for Thought – Political Discussion

Note: This is a political article – Feel free to ignore should you not wish to think about politics.

It is no secret that I am fiscal conservative.  I believe strongly that our government is oversized and inefficient.  The elected officials are not motivated or rewarded for making the needed hard management decisions that would reduce the size of the government.  The following video is from a Professor  Hrebiniak at Wharton.  Obviously, business school professors are financial conservatives.  However, this man does take the stuffing out of the current administration but in the context of the larger political conundrum.  If you are wishing to understand the economic impacts of politics in the current climate, here is a great primer.

By the way, Professor Hrebiniak is a Cornell / SUNY Buffalo alum.  From my research into his background, he is like most of us from the greater New York area.

Additionally, here is an article from the Economist magazine that is short but very much worth a quick read.  My point is that I hope you thinking about what you want from the political process.  I hope you are engaging your elected representatives.  I believe like Professor Hrebinia, an electorate that does not demand better will not receive better.  It is time we address the elephant in the corner and reduce the military industrial complex.  Do we really need 300 Military golf courses, 700+ military bases and the largest standing army in the world?  One only has to look back at the American Revolutionary War to realise he with the biggest gun will not always win.

Hope you like these two bits.  If I have touched a nerve, send me and email or post below.  Debate and discussion is the only way productive change will be introduced.