Op-Ed: The Market Won't Rescue Us from Inflation This Time - There's Only 1 Solution and It Will Be Messy
Progressives seem to be confused about inflation.
Inflation is an increase in the supply of money and credit at a rate faster than the rise in the production of goods and services. It is a monetary issue on the one hand and a supply issue on the other.
Therefore, the solution lies in restricting money growth to a level approximate to that of economic growth and allowing natural market forces to increase supply. Wherever there are legal bottlenecks to production and distribution — such as taxes, laws that serve as barriers to entry for competitors, import restrictions, and above all senseless regulations — government can play an active role in getting out of the way of production.
It is said the answer to high prices is high prices. That is true if the government gets out of the way.
High prices curtail demand and consumers become more careful about their consumption of expensive goods and services. Conversely, profit margins should rise in sectors where prices are rising the most, attracting capital to areas where it is needed and expanding production. Demand and supply adjust, and prices moderate.
At the centerpiece of the worst inflation in 40 years is the cost of oil and natural gas.
Insofar as the supply issues are concerned, progressives and their sock puppet President Joe Biden seem to understand that the drop in Russian production due to the war and sanctions has something to do with the problem. But when asked if we can do anything to increase supply, they stare off into space as if the power supply to their brain is generated by a windmill, and the wind just quit blowing.
Just last week, Treasury Secretary Yellen turned her attention away from abortion and gun control long enough to state that the administration has done all it can about rising oil prices.
Really?
What if progressives allowed all that gas in the Marcellus shale, which can be pumped in Pennsylvania, to be developed? What if the great oil production that once came from California was permitted to grow? What if the reserves in Alaska were tapped? What about all the opportunities offshore and on federal land?
In short, America has plenty of oil and gas, but environmental fanatics will not permit it to be developed. For years, their strategy has been to take available land with energy resources off the market and elsewhere harass development with endless regulations and lawsuits.
And now, the government has set explicit goals to phase out oil and gas usage by 2030.
Meanwhile, the ESG movement does everything it can to make energy companies a pariah and starve them of capital. If you don’t have money, you can’t expand.
Put yourselves in the shoes of an oil or gas company executive. Prices are rising, profits are good, but the government intends to put you out of business. Why would you make substantial investments in projects that have a usable life of 30 to 50 years, knowing full well your business could be shutting down in about eight years?
You wouldn’t, which is why in the present situation rising prices will not do their magic, that is, call forward new production to alleviate shortages.
This crisis in the short term has been aggravated by Russian President Vladimir Putin. But the guilty parties are homegrown: the environmental movement and its allies in the Democratic Party.
The energy crisis is wholly artificial, designed to drive the economy away from inexpensive oil and gas and toward the new “green” nirvana of solar and wind. They want fossil fuels to be expensive so that their forced alternatives look better. They don’t want a level playing field where one energy source competes against the other. They want to cram their ideas down our throats.
If you can’t afford to drive to work or feed your family, you are just collateral damage necessary to achieve their greater goal.
This push from the top down to change our energy system is aggravating the inflationary problems touched off by wild deficit-financed spending and a Federal Reserve Board that has gone out of its way to remove any restraint on the legislative and executive branches of government. Combined with the environmental movement, that has locked us into devastating inflation that will be hard to escape.
Unfortunately, market forces will not be unleashed to help alleviate the problem. There simply is no incentive under the circumstances to make new long-term investments in the sector. Why invest in more hydrocarbon production if they are simply going to put you out of business?
Only one other solution exists. We must vote out of office those who grovel to the environmental movement and encourage all forms of energy development. It will be messy, and the left will scream bloody murder.
But if we don’t, our standard of living, and national security, will be in grave jeopardy.
The views expressed in this opinion article are those of their author and are not necessarily either shared or endorsed by the owners of this website. If you are interested in contributing an Op-Ed to The Western Journal, you can learn about our submission guidelines and process here.
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