And what the article doesn’t say is that much of the California oil wells are sitting still as we speak. I know because I used to work out there and it’s just dead now, no jobs, no new equipment, no one willing to fight Cal Osha or CalEPA to work out there.
When the Mexican government takes over, maybe they’ll sell us oil cheaper than Chavez will?
You know who also has that in common? Saudi Arabia. Classic commodity export economy.
Commodity export economies are not necessarily to be envied or copied. Where would you rather live, Japan or Saudi Arabia? German suburbs or the favelas of Brazil?
That’s not me saying that California should not capitalize on its natural resources. They should; it’s a great source of wealth. But I don’t think we should trumpet North Dakota as a model for the nation.
Food for thought – if Julian L. Simon and Paul Ehrlich had made their bet extending into 2011, Simon would have lost. Commodities are currently in an upswing, which is good for Australia, but what goes up must come down. Commodity economies are volatile economies, while design and production economies (like Japan) can weather nearly any storm (even tsunamis and nuclear meltdowns).
The great thing about the United States is that we have the luxury of having 57 50 different economies to sustain the overall economic health of the country. While a commodity economy might be a volatile endeavor, if the overall economy of the country is well-balanced, it, too, can “weather nearly any storm.”
So, no, the country as a whole should not aspire to be like North Dakota or Australia, but in a nation-wide recession, to deny commodity-rich states the right to exploit those commodities for their own health and the economic health of the country is utterly ludicrous.
re: Brock “Commodities are currently in an upswing”.
How much of the spike in commodity prices is based on increased demand/scarcity of supply and how much of it is due to the inflationary monetary policy of Bernacke (sp?).
My gut tells me the decreased value of the dollar is the largest contributor to increasing commodity prices.
“My gut tells me the decreased value of the dollar is the largest contributor to increasing commodity prices.”
As trade between Australia and China goes, that’s not really relevant. Oil is more expensive everywhere; just more so in the USA. Commodities are up because China and India are on rocket-like economic growth trajectories, and the 2.5 billion people they have between them distort markets “just a tad.”
But at some point China and India will become “developed”, and they will stop dropping 50% of their GDP into infrastructure and cars. At that point the commodity economies will take a severe hit.
The international oil market uses US dollars as the baseline currency, so when the dollar is devalued, the price of oil automatically increases. Does that apply to other internationally traded commodities?
“The international oil market uses US dollars as the baseline currency, so when the dollar is devalued, the price of oil automatically increases.”
Sigh.
Yes, the nominal price in dollars goes us, but the real price in the currency of the nation purchasing the commodity goes nowhere.
If the dollar falls relative to the Euro, oil is more expensive in dollars, but the Euro is also worth relatively more – so for France it’s a wash. Same for China, India, and all other countries that don’t use the dollar.
Put another way, Bernanke’s inflation only inflates the dollar, not the Yen.
China takes it on the chin a bit more than other nations though because they peg their currency to the dollar, so oil is getting more expensive for them too. But it wouldn’t if they didn’t manipulate their currency.
Excuse me while I fall about laughing.
It is likelier that NASA will return to the Moon by 2013 than that Australia will run a surplus by then.
We have a bunch of barbarian looters known as the Australian Labor Party in power supported by a bunch of far left whackjobs known as The Greens and two slimeball independents. The government is determined to introduce a carbon tax despite having explicitly ruled it out in the last election campaign, we’re A$150 billion in federal debt in the last 3 years after the previous Conservative government left a surplus and a fund to pay federal public servants retirement benefits. We have 6 State governments which until recently were ALP (3 now nominally conservative or what passes for such in Australia) which were utterly hopeless and all deeply in debt.
The Australian economy might look OK overall but it is a thin veneer of mining income on top of nothing very good at all.
Yes, when the commodity boom ends, Australia will be in deep trouble.
And what the article doesn’t say is that much of the California oil wells are sitting still as we speak. I know because I used to work out there and it’s just dead now, no jobs, no new equipment, no one willing to fight Cal Osha or CalEPA to work out there.
When the Mexican government takes over, maybe they’ll sell us oil cheaper than Chavez will?
You know who also has that in common? Saudi Arabia. Classic commodity export economy.
Commodity export economies are not necessarily to be envied or copied. Where would you rather live, Japan or Saudi Arabia? German suburbs or the favelas of Brazil?
That’s not me saying that California should not capitalize on its natural resources. They should; it’s a great source of wealth. But I don’t think we should trumpet North Dakota as a model for the nation.
Food for thought – if Julian L. Simon and Paul Ehrlich had made their bet extending into 2011, Simon would have lost. Commodities are currently in an upswing, which is good for Australia, but what goes up must come down. Commodity economies are volatile economies, while design and production economies (like Japan) can weather nearly any storm (even tsunamis and nuclear meltdowns).
The great thing about the United States is that we have the luxury of having
5750 different economies to sustain the overall economic health of the country. While a commodity economy might be a volatile endeavor, if the overall economy of the country is well-balanced, it, too, can “weather nearly any storm.”So, no, the country as a whole should not aspire to be like North Dakota or Australia, but in a nation-wide recession, to deny commodity-rich states the right to exploit those commodities for their own health and the economic health of the country is utterly ludicrous.
re: Brock “Commodities are currently in an upswing”.
How much of the spike in commodity prices is based on increased demand/scarcity of supply and how much of it is due to the inflationary monetary policy of Bernacke (sp?).
My gut tells me the decreased value of the dollar is the largest contributor to increasing commodity prices.
“My gut tells me the decreased value of the dollar is the largest contributor to increasing commodity prices.”
As trade between Australia and China goes, that’s not really relevant. Oil is more expensive everywhere; just more so in the USA. Commodities are up because China and India are on rocket-like economic growth trajectories, and the 2.5 billion people they have between them distort markets “just a tad.”
But at some point China and India will become “developed”, and they will stop dropping 50% of their GDP into infrastructure and cars. At that point the commodity economies will take a severe hit.
The international oil market uses US dollars as the baseline currency, so when the dollar is devalued, the price of oil automatically increases. Does that apply to other internationally traded commodities?
“The international oil market uses US dollars as the baseline currency, so when the dollar is devalued, the price of oil automatically increases.”
Sigh.
Yes, the nominal price in dollars goes us, but the real price in the currency of the nation purchasing the commodity goes nowhere.
If the dollar falls relative to the Euro, oil is more expensive in dollars, but the Euro is also worth relatively more – so for France it’s a wash. Same for China, India, and all other countries that don’t use the dollar.
Put another way, Bernanke’s inflation only inflates the dollar, not the Yen.
China takes it on the chin a bit more than other nations though because they peg their currency to the dollar, so oil is getting more expensive for them too. But it wouldn’t if they didn’t manipulate their currency.
Excuse me while I fall about laughing.
It is likelier that NASA will return to the Moon by 2013 than that Australia will run a surplus by then.
We have a bunch of barbarian looters known as the Australian Labor Party in power supported by a bunch of far left whackjobs known as The Greens and two slimeball independents. The government is determined to introduce a carbon tax despite having explicitly ruled it out in the last election campaign, we’re A$150 billion in federal debt in the last 3 years after the previous Conservative government left a surplus and a fund to pay federal public servants retirement benefits. We have 6 State governments which until recently were ALP (3 now nominally conservative or what passes for such in Australia) which were utterly hopeless and all deeply in debt.
The Australian economy might look OK overall but it is a thin veneer of mining income on top of nothing very good at all.
Yes, when the commodity boom ends, Australia will be in deep trouble.