Wednesday, July 30, 2008

Evil Speculators

Democrats blame “evil” speculators for the high price of oil. Speculators figure that, with liberal Democrats in firm control of Congress and a left-wing Democrat leading in the polls for president, the ban on drilling for oil on our coasts and in the Arctic will continue indefinitely - and oil prices will keep going up.

I’ve been speculating on the price of oil too. Does that make me a bad person? I sent a check to B&L Oil of Fryeburg to assure that I would pay no more than $4.85 per gallon for heating oil through next winter. I left my foot in the door a bit though. If the price should go down, I’ll pay market price. (Maybe Democrats will be forced to lift the ban? Heck, you never know) I could have paid up front for all 750 gallons - the amount I burned last year - at $4.60 per gallon. I have the money, but I chose what I chose because I still have the liberty to do so.

Some people are avoiding oil and laying in a lot of firewood. I have a couple of cords left out in the yard, but I’d prefer to burn oil. Some people are converting to wood pellets. Others are buying coal. Some will burn used motor oil, or even old vegetable oil from restaurant fryolaters. We’re all speculating. We’re exercising the liberty to make our own choices and live with the results. If we choose right, we’ll be happy. If we choose wrong, too bad for us. That’s how liberty works. As Benjamin Franklin put it: "The U.S. Constitution doesn't guarantee happiness, only the pursuit of it. You have to catch up with it yourself."

Lots of people have been speculating in real estate over the past ten or fifteen years. Some made a lot of money at it, causing many others to jump in. They took out mortgages for more than they could afford to pay back. They took risks, and that’s what speculation is. They figured they would make interest-only payments while the value of their new real estate climbed. Then they would flip it - sell at profit. It worked for a while and many got rich. Were they bad people? Some think so because their speculation helped drive home prices up. People who already owned real estate, however, thought that was wonderful. People who were renting and wanted to buy a home didn’t think it was so great. Oh well.

Somewhere along the way, liberal Democrats noticed that banks avoided granting mortgages to people in certain neighborhoods. They called it “Redlining” and accused loan officers of racism. Banks pointed out that it was bad business lending to individuals who were unable to make their payments. If minorities happened to comprise a higher percentage of such people, or if certain neighborhoods had lots of them, that was not evidence of racism. Mortgage decisions were based on numbers, not colors. As economist Thomas Sowell pointed out in a recent column: “In our own personal lives, common sense leads us to avoid some neighborhoods. If you want to call that "redlining," so be it. But places where it is dangerous to go are often also places where it is dangerous to send your money.” Liberal Democrats in Congress, however, passed legislation forcing banks to make risky loans to certain people, and in certain places, where they never would have otherwise.

Eventually, real estate prices stopped rising. Many who speculated couldn’t make their payments and defaulted. Then prices fell and more defaulted. Then prices fell still further. Banks who lent money to a lot of risky speculators went belly up. No one knows when it will all bottom out because, as Benjamin Franklin pointed out a long time ago, there are no guarantees. Liberal Democrats in Congress, however, don’t believe that. They passed a $300 billion bill to bail out nearly half a million speculators. They want Americans who made the right choices to bail out those who chose wrong. We who are making our payments now have to help speculators make theirs too.

I don’t like that. I don’t like it one bit. I don’t want to take away from speculators the liberty to fall on their faces. They should have the freedom to fail because, as British farmer Thomas Tusser said half a millennium ago: “A fool and his money are soon parted.”

The question now is, are we fools too? Does the Democrat-controlled Congress take us for fools? It appears that way. What’s even worse? Our “Republican” president - the guy who put the “Dub” in Dubya - is going to sign the bill.

And here’s another question. Why are people who speculate on oil prices “evil” to be punished by excess-profits taxes, but those who speculate on real estate prices are “innocent victims” to be protected by taxpayer-funded bailouts?

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