The speculator scapegoats

Jonah Goldberg:

CONTRARY to nearly all received wisdom in DC, not to mention the rhetoric of the presumptive nominees of both major parties, the scariest moments in US politics are often its most bipartisan.

Some would say this was demonstrated in the wake of 9/11, when all those allegedly terrible national-security laws were enacted by both parties, or in the run-up to the Iraq war. But I find it is most true when Washington takes a populist turn, which it's doing now with pugnacious stupidity, attacking that classic populist boogeyman: the "oil speculator."

Sen. John McCain has declared the profits of US oil companies "obscene" and wants to hunt down "speculators" with congressional investigations. Sen. Barack Obama also sees "speculation" as the culprit behind our energy woes. Rep. Bart Stupak (D-Mich.) blames Goldman Sachs and other Wall Street star chambers. House Speaker Nancy Pelosi warns that "we are putting oil speculators on notice." Senate Majority Leader Harry Reid vows to "end speculation on the oil markets."

Is trying to anticipate the correct price of a commodity now un-American - an act the US government should punish?

It seems that whenever things go bad and government is largely to blame, politicians look for villains other than themselves.

In 1892, the Populist Party platform warned of "a vast conspiracy against mankind" run by gold bugs, bankers and, yes, "speculators." Populists joined the fascists and socialists of Europe in calling for the heads of those who produced nothing while making vast sums from moving numbers around.

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You have to wonder whether candidates from either party think Google's profits are obscene or Microsoft for that matter. I suspect that both have a higher profit margin than the oil companies, however neither has to buy a product subject to speculation in any material way. Just a oil in the fuel for our transportation and other economic activity, Google and Microsoft have become indispensable in processing information needed to make businesses work.

Sure, there are alternatives to both, but they both got where they are by providing the best product at the best price. It is important to keep product and price in the same equation. Some can argue that Apple is a better product, but it sells fewer units for the same reason that Porsche sells fewer cars than Honda.

Speculators add liquidity to markets that deal in commodities. There are two sides to every transaction. There are lots of buyers and sellers. If someone bought all the oil in the world, it would be of no value to him if there were no buyers at the price he wished to sell it at. However, those who create artificial scarcity by limiting production are the biggest friends of those who speculate on higher prices. They are also the biggest friends of OPEC. By limiting US production the Democrats aide the two groups they blame the most for high oil prices. They have met the enemy and it is themselves.