It’s sad that the first rule of economics is opposite of the first rule of politics, but isn’t that true in all economic environments? Cardigan sweaters being included in the challenges of the 70s caused some laughter, particularly when one reflects on the outrageous disco clothes of the era..
Thanks for this. You might enjoy the last of the four Rest is History episodes on "Britain in 1970s" and how various politicians wanted to respond to these kinds of problems. Surprisingly, it was Jim Callaghan's Labor government - against the wishes of his more liberal backbenchers - that plonked for a version of what we might today call "austerity." It was kind of pre-Thatcher thatcherism:).
"The first principle of economics is: Don’t transfer income by distorting prices. The first principle of politics is the opposite.
"High energy prices do slow the economy. But a slowdown turns into a recession only when something financial goes wrong.
"What should government do about rising energy prices? Nothing. Or, more concretely, get out of the way, ease restrictions, and let the market work its magic of sending energy to the most economically important uses while encouraging others to save, substitute or provide new energy." --- JHC, The Wall Street Journal, April, 2026.
Easy to say, harder to do when your energy supplies (oil, natural gas, helium, &c.) originate in the Persian Gulf littoral states that have suffered as a result of the preventative war which the U.S. and Israel in their rush to arms.
The Philippines is a case in point--it imports a high proportion of petroleum from the Middle East, and prices have risen to the point where farmers are leaving crops in the fields because the revenue from harvesting is less than the expense of the diesel fuel required to operate the harvesting machinery. S. Korea is another case in point--it imports all of its energy requirements and all of its helium. Helium is an essential input to the manufacture of semiconductors. No helium, no semiconductors. S. Korea obtains all of its helium from the Middle East natural gas producers.
So, wax eloquent over economic theory. Tell the central bankers what they already know. But spare a thought for the poor smucks that live hand-to-mouth producing the produce and rice that fill the bellies of the urban working stiffs who manufacture the goods which the Western consumers find so attractively priced in the West's retail stores.
All because the White House failed to "run the movie" before committing warfare on the one region in the World that produced, before the war, 20% of the World's energy.
I am not sure, but are you advocating for the status quo with Iran in control of oil, Helium etc.? And, is this just about oil? I am curious of how your criticism turns into a solution to the most evil regime on the planet? Please recall, they are murderous Islamist thugs with no use for human life that have delivered more death and destruction in the past 47 years than we or the rest of the civilized world should tolerate.
Your remarks are political in nature and are framed based on a biased normative narrative: "they are murderous Islamist thugs with no use for human life that have delivered more death and destruction in the past 47 years than we or the rest of the civilized world should tolerate." Do you want to discuss the uncompensated negative externalities of the U.S.-Israel war on Iran on the world economy, or do you want to discuss the basis for the war, its legality, and the negative consequences for the littoral states who had no hand or role in Hamas or Hezbollah's attacks on Israel over the past 3 to 5 years? Make a choice.
In what universe can you separate politics from economics? Should good not be considered in economics? Should evil not be considered in economics? When is it appropriate to view a decision effecting economics only in the short term without considering long term consequences. An economic and political world will benefit from the Iran conflict as will the citizens of Iran. Does their suppression of freedom and economic opportunity for the last 47 years of no consequence? Should the narrow perspective of a short term outcome ever replace the consequences of long term economic policy. By your standards, not confronting Hitler would have been good for the U.S. as our economics throughout WWII was certainly harmed and dislocated.
We already have bad policies in the escalation of tariffs and the internal warfare against immigrants--legal and illegal. And the fiscal house is a little disorderly, too. And while an energy crunch doesn't have to turn into a recession it can still have some pretty intense but uneven distributional effects. While it's not a likely outcome, I'm not sure that against that backdrop a lump-sum profits tax would do a lot of harm, especially given the tax breaks oil companies already get for expensing intangible drilling costs and percentage depletion.
Great insights. "Higher gasoline prices need not mean inflation," unless governments are tempted into "ham-handed policy responses", which reduce the expected future path of primary surpluses - your FTPL mechanism, John :). Not a very unlikely scenario in Europe, I am afraid.
Trump just proposed a 550,000 barrel a day oil pipeline thru my state of Montana but not through any Fentanyl/methamphetamine territories (Indian Reservations) so they can't interefere with their usual nonsense. The Eco-Fascists are opposed but those Communists hate everything any way.
Hope it goes through before Kamala Harris and AOC object.
In 1979, the increase in energy costs (gasoline) was abrupt and based significantly on supply sharply declining compared to demand. Then add in ridiculous policy decisions and stagflation was predictable and did occur.
Today the price of a gallon of gas at $4 per gallon adjusted for inflation using 2020 as the starting point is equivalent to $3.15 then with27% inflation. Not much screaming in 2020, but a lot of screaming now. How much is political?
There is not a supply constraint for the U.S. except maybe California. Europe and much of the "greenie" driven world, especially the woke west, chose their own energy driven idiocy. They will have more severe supply constraints, and, if President Trump is not allowed to manage the Iranian nightmare, Iran will be the controller of energy prices at least in the near future. The Middle-East oil producers are already seeking alternatives to the Strait of Hormuz. True, prices are up and total supply is down, but the U.S. along with Venezuela can moderate much of the void thereby mitigating astronomical price increases.
Is there some pain? Yes. Is it worth it in order to energize innovation for the future, wake up the ideological idiots from their “green” fantasies, change the world’s energy supply dynamics (the entire market including OPEC) and eliminate a true threat to the future of energy and the safety of the world by eliminating an Islamist terrorist bunch of crazies? Yes, of course. And there is no other choice other than the status quo which is intellectually and economically indefensible.
That seems like a strange opinion. In short, your final conclusion is "the government should do nothing," right? Then why don't you say anything about the decision to attack Iran? The principle of liberalism is to enjoy the benefits of the economy, transcending race and nationality, isn't it? Isn't it a crime for the government to take away the right to use Iran's oil from the market?
The US hasn’t won a war for over 50 years. The main risk is the Strait staying closed so oil supplies physically run out in some countries. That would be economically damaging.
Except for the wars the US did win. Minor ones in Panama and Grenada. A more significant one in the Gulf War (1990 - 1991). I will gladly concede that we are not anywhere close to winning the current war with Iran.
Government doing nothing...when cows fly. I foresee a windfall profits tax in the near future from the same folks who like to tax billionaires because, well, because it's where someone else's money is.
Hope your wisdom wins the day
It’s sad that the first rule of economics is opposite of the first rule of politics, but isn’t that true in all economic environments? Cardigan sweaters being included in the challenges of the 70s caused some laughter, particularly when one reflects on the outrageous disco clothes of the era..
Thanks for this. You might enjoy the last of the four Rest is History episodes on "Britain in 1970s" and how various politicians wanted to respond to these kinds of problems. Surprisingly, it was Jim Callaghan's Labor government - against the wishes of his more liberal backbenchers - that plonked for a version of what we might today call "austerity." It was kind of pre-Thatcher thatcherism:).
"The first principle of economics is: Don’t transfer income by distorting prices. The first principle of politics is the opposite.
"High energy prices do slow the economy. But a slowdown turns into a recession only when something financial goes wrong.
"What should government do about rising energy prices? Nothing. Or, more concretely, get out of the way, ease restrictions, and let the market work its magic of sending energy to the most economically important uses while encouraging others to save, substitute or provide new energy." --- JHC, The Wall Street Journal, April, 2026.
Easy to say, harder to do when your energy supplies (oil, natural gas, helium, &c.) originate in the Persian Gulf littoral states that have suffered as a result of the preventative war which the U.S. and Israel in their rush to arms.
The Philippines is a case in point--it imports a high proportion of petroleum from the Middle East, and prices have risen to the point where farmers are leaving crops in the fields because the revenue from harvesting is less than the expense of the diesel fuel required to operate the harvesting machinery. S. Korea is another case in point--it imports all of its energy requirements and all of its helium. Helium is an essential input to the manufacture of semiconductors. No helium, no semiconductors. S. Korea obtains all of its helium from the Middle East natural gas producers.
So, wax eloquent over economic theory. Tell the central bankers what they already know. But spare a thought for the poor smucks that live hand-to-mouth producing the produce and rice that fill the bellies of the urban working stiffs who manufacture the goods which the Western consumers find so attractively priced in the West's retail stores.
All because the White House failed to "run the movie" before committing warfare on the one region in the World that produced, before the war, 20% of the World's energy.
I am not sure, but are you advocating for the status quo with Iran in control of oil, Helium etc.? And, is this just about oil? I am curious of how your criticism turns into a solution to the most evil regime on the planet? Please recall, they are murderous Islamist thugs with no use for human life that have delivered more death and destruction in the past 47 years than we or the rest of the civilized world should tolerate.
Your remarks are political in nature and are framed based on a biased normative narrative: "they are murderous Islamist thugs with no use for human life that have delivered more death and destruction in the past 47 years than we or the rest of the civilized world should tolerate." Do you want to discuss the uncompensated negative externalities of the U.S.-Israel war on Iran on the world economy, or do you want to discuss the basis for the war, its legality, and the negative consequences for the littoral states who had no hand or role in Hamas or Hezbollah's attacks on Israel over the past 3 to 5 years? Make a choice.
In what universe can you separate politics from economics? Should good not be considered in economics? Should evil not be considered in economics? When is it appropriate to view a decision effecting economics only in the short term without considering long term consequences. An economic and political world will benefit from the Iran conflict as will the citizens of Iran. Does their suppression of freedom and economic opportunity for the last 47 years of no consequence? Should the narrow perspective of a short term outcome ever replace the consequences of long term economic policy. By your standards, not confronting Hitler would have been good for the U.S. as our economics throughout WWII was certainly harmed and dislocated.
Clearly, you are not interested in rational dialogue. You're welcome to contact me here when you've calmed down.
When arguments are lacking, insult the those with contrary opinions. Insulting others is a classic sign of anger.
Not an insult Mr. Dobzyniak. Merely, an invitation. I take it that you have replied, "No", to that invitation.
We already have bad policies in the escalation of tariffs and the internal warfare against immigrants--legal and illegal. And the fiscal house is a little disorderly, too. And while an energy crunch doesn't have to turn into a recession it can still have some pretty intense but uneven distributional effects. While it's not a likely outcome, I'm not sure that against that backdrop a lump-sum profits tax would do a lot of harm, especially given the tax breaks oil companies already get for expensing intangible drilling costs and percentage depletion.
Great insights. "Higher gasoline prices need not mean inflation," unless governments are tempted into "ham-handed policy responses", which reduce the expected future path of primary surpluses - your FTPL mechanism, John :). Not a very unlikely scenario in Europe, I am afraid.
Trump just proposed a 550,000 barrel a day oil pipeline thru my state of Montana but not through any Fentanyl/methamphetamine territories (Indian Reservations) so they can't interefere with their usual nonsense. The Eco-Fascists are opposed but those Communists hate everything any way.
Hope it goes through before Kamala Harris and AOC object.
In 1979, the increase in energy costs (gasoline) was abrupt and based significantly on supply sharply declining compared to demand. Then add in ridiculous policy decisions and stagflation was predictable and did occur.
Today the price of a gallon of gas at $4 per gallon adjusted for inflation using 2020 as the starting point is equivalent to $3.15 then with27% inflation. Not much screaming in 2020, but a lot of screaming now. How much is political?
There is not a supply constraint for the U.S. except maybe California. Europe and much of the "greenie" driven world, especially the woke west, chose their own energy driven idiocy. They will have more severe supply constraints, and, if President Trump is not allowed to manage the Iranian nightmare, Iran will be the controller of energy prices at least in the near future. The Middle-East oil producers are already seeking alternatives to the Strait of Hormuz. True, prices are up and total supply is down, but the U.S. along with Venezuela can moderate much of the void thereby mitigating astronomical price increases.
Is there some pain? Yes. Is it worth it in order to energize innovation for the future, wake up the ideological idiots from their “green” fantasies, change the world’s energy supply dynamics (the entire market including OPEC) and eliminate a true threat to the future of energy and the safety of the world by eliminating an Islamist terrorist bunch of crazies? Yes, of course. And there is no other choice other than the status quo which is intellectually and economically indefensible.
That seems like a strange opinion. In short, your final conclusion is "the government should do nothing," right? Then why don't you say anything about the decision to attack Iran? The principle of liberalism is to enjoy the benefits of the economy, transcending race and nationality, isn't it? Isn't it a crime for the government to take away the right to use Iran's oil from the market?
The US hasn’t won a war for over 50 years. The main risk is the Strait staying closed so oil supplies physically run out in some countries. That would be economically damaging.
Except for the wars the US did win. Minor ones in Panama and Grenada. A more significant one in the Gulf War (1990 - 1991). I will gladly concede that we are not anywhere close to winning the current war with Iran.
Government doing nothing...when cows fly. I foresee a windfall profits tax in the near future from the same folks who like to tax billionaires because, well, because it's where someone else's money is.
Where do you stand with the temporary suspension of the gas tax? I think it is nothing more then a political stunt. Just my humble opinion.