Tuesday, May 17, 2011

15 Children; Chavez sucks; and a defence of speculators

  • This local woman I was talking to, told me her grandfather died in 1946.  From what I could make out of her story telling, her grandfather was rich and was murdered by kidnappers.  At the time in China, there was little law and order.  So, her grandfather being rich, had land, and so was kidnapped on many occasions by these men demanding ransom.  Finally, the grandmother had nothing to give....
  • If wasn't interesting enough, the woman then told me that her grandmother had fifteen children!  Four of them survived to adulthood, including the woman's mother.  The others died because of childhood diseases and war (some had been soldiers).  One of the grandmother's sons, the woman's uncle, fled to Taiwan in 1949, and it wasn't till 1989 till the grandmother and the uncle saw each other again.  The pleasure of seeing her son after all those years, however, killed the grandmother.  A jaw-dropping set of circumstances for this blogger. 
  • What's Tony like at school?  We had one of his teachers over for supper on Monday evening and she gave us details.
  • This teacher was from South America.  She was from Columbia, moved to Venezuela, but then had to flee Hugo Chavez.  Chavez, from what she says, is trying to turn Venezuela into North Korea.  He is closing the country off to the world, and the thugs rule.  She found it mind-boggling, that in this day and age, where Communism has been proven to not work, that Chavez wants to bring it back.  Meanwhile, gullible lefties that I have meet in China have expressed admiration for him.  Anyone who picks on a Texas evangelical has to be good right?  Actually -- good left -- that last question was left-wing logic.
  • Meanwhile, I also hear this talk of getting "the oil speculators who are driving up the price of oil." or so they say.  Speculators serve an economic purpose that isn't fully appreciated.  First off, as I remember Milton Friedman saying, speculators take on risks.  Every economic decision made is a risk -- a gamble as it were.  The idea that if we just get rid of the gambling in the economy, that all prices would be cheaper is logically impossible.  Secondly, speculators allocate goods over time.  If there weren't speculators, people would consume all they have right away -- there would be  continual cycles of feast and famine.  Speculators in trying to determine future prices of goods are doing us a big favour -- they are ensuring goods are allocated properly over time.  This kind of speculation in food markets have been shown to prevent starvation.  This second point must be stressed.  I hear this talk of how oil inventory levels are the same now as they were last year and how the price now is so much more expensive.  How can this be? some ask.  And many answer saying it is the speculators gambling, driving up the price.  Well, a lot has happened in the last year, to indicate to speculators that future oil supplies won't be so abundant.  For instance, the Obama administration, because of the BP accident, had declared a moratorium on more drilling in the U.S.A.  (Obama's talk about having his Justice department investigate oil speculation is classic demagoguery -- no sane person should vote for him because of this).  And China and India are needing  more oil than ever for their economies.  Combine this with the fact that supply of oil, in economic parlance, is very inelastic, and the price of oil is explained and one can't help conclude that in this day and age, witch hunts still exist.  The witches are now called speculators.  If we consumed this oil now, which is what would be happening if prices were lowered, we would been facing shortages in the immediate future.


Colin said...

The problem with your statement is it's incomplete, as if often the case with right-of-centre commentators.

Speculators - in whatever form they take - take on 'risk' in name only. Any actual risk is almost always passed on to others in the case of a meltdown, usually the federal government of whatever country they operate in since only they have pockets deep enough to pick up the tab for reckless endeavours.
We saw this most starkly in the US government bailout of countless stupid, inefficient, reckless banks and companies.

In a true market economy, they would have been left to the inevitable -- extinction, so that other, newer and presumably wiser, entities could evolve in their place.

Speculators, contrary to your assumption, don't serve a public good because they don't have the public good as their motivation...they're in it to make themselves rich.

I'm not attaching a value or judgement to that - that's just the way of the world. But I do think they are on balance a negative force on any economy.

Andis Kaulins said...

Thanks for the comment.

Everyone who takes part in the economy is a speculator. Everyone. Whenever you choose to buy something, you are taking the risk that the price may go down. Of course, there is also the chance the price will go up. But that shows the problem with this "evil speculator" talk - if you look at is closely, you can't determine who is or isn't a speculator.

The government bailouts were stupid but that isn't an argument against speculation. That is an argument against too much government involvement in the economy.

You could say that there should be more regulation then. But again, often government regulation, made with the best of intentions, produces unforeseen outcomes.

I don't know about you about I don't have deep pockets and don't care so much for the public good when I act in the economy. I would like to meet someone who has the public good in account when they enter the economy. I haven't meet a person yet who isn't motivated by their own welfare.

And again, the speculators derided against whether in oil or other commodities, serve an economic purpose that is misunderstood, especially by Socialists. They allocate goods over time. Central Planners have never been able to allocate over time. Why was it that people in the Soviet Union had to waste so much of their time lining up to get bread? They were in an economy whether speculators weren't allow to make money for themselves.

This talk of speculators might as well be talk about witches.

Colin said...

If you're going to hold one side of the ideological equation to a standard, then you ought fairly to hold the other side to that, too.

I laugh when I hear talk of the mythical 'bread lines' in old Russia...the laughs are even louder when I drive past a gas station with prices rising in perfect lockstep, or a riot outside an Apple store (which happened in China recently upon the debut of the new iPad2, but I digress)

Intent is everything. You and I, with similar sized pockets, just want to get what we need...that's pretty much the extent of our involvement in the economy.
Speculators, whether currency or commodities, see the economy as a lever they push for their own enrichment...and that attitude extends to their fellow human beings, too.

I heard a shocking piece done by This American Life, where the journalist talked to currency speculators in a posh NYC bar shortly after the 2008 economic collapse (caused by the unchecked excesses of their peers, by the way).
The hubris and willful ignorance was appalling. To them, they didn't do anything wrong. They deserved to keep getting their multi-million dollar bonuses, even though they failed...other people were dumb and only they were smart. It went on and on.

The point is, when a small group of people start affected issues globally, and their only motivation is to plunder as much as they can -- then you've got a problem.
A wild dog doesn't need to have its leash loosened or taken off...

Andis Kaulins said...

I am of Latvian ancestry. I will never forget the time when we have relatives come from the Soviet Union (which Latvia was unfortunately a part of). We went to a McDonalds on Pembina Highway. My Soviet relative was taking salt from the condiment area. She couldn't believe that it was possible for salt to be put out in the open like that. The shortages were real. I have had many Chinese tell me about them as well. They all prefer Capitalism. Lineups for Ipads are better than lineups for bread -- it shows capitalism works. That it is a spiritually vacuous thing to lineup for some gadget, there is no doubt, but I hear people saying this all the time so it is not like we are all lemmings.

Prices have to move in lockstep in those instances.

If the economy is the lever you say it is, then Central Planning would work. It doesn't as the Soviet Union amply demonstrated.

These nefarious forces screwing all the world's people that you talk about will always be there. Everyone looks after his own. The best we can hope for is that these forces are dispersed. A central government controlling everything is the greatest evil that can be imagined. Big corporations, of which there are many, are on the whole good for the world - they have their ups and downs too.

The traders in the bar you talked of were no doubt as stupid and greedy as you say they were. But what of it? You can find people in every profession, whether in the private or public sectors, who are cynical and manipulative. Hopefully, they get their comeuppance.