by Morrow Hall

Created on: May 15, 2008

Gas prices have not gone up!

All sorts of culprits have been blamed for what we're paying for gasoline at the pump: OPEC isn't pumping enough; China is using more; the Democrats are at fault; the Republicans are at fault; the Bilderburgs or the Trilateral Commission are stuffing their pockets; whatever.

The real reason is that the dollar is worth a lot less.

There are several ways to determine what the dollar is worth. The simplest way is to look at the price of stable commodities in dollars. The most stable commodity is gold, because it is highly valued but not widely used in industry, and as such is not much subject to fluctuations in industrial demand.

The price of gold as of this writing (5-15-08) is just over $880 an ounce. A gallon of gas costs just over $3.70.

In 1980, gold hit its previous high of $612.56, but since 1989, the cost of gold stayed at less than $400 per ounce. It was below $300 in the late 1990s. It has been rising steadily since President Bush, Jr. took office.

By this measure, the dollar has lost over half its value in this century. If you cut that $3.70 cost for gasoline in half, you get $1.85. If you adjust the cost based on $300 gold, it comes to about $1.26. Those are prices we remember fondly.

What the heck is happening to the dollar?

For one thing, we're spending about $5,000 per second on the occupation of Iraq and our military activities in Afghanistan. That's all on our credit card, too. It's borrowed money. We have to pay interest on it regularly, and eventually we'll have to pay it back.

Believe it or not, a profligacy of this magnitude is not enough to cut the value of our economic engine in half. It can only be blamed for a few percentage points. Something else is going on.

I think the major cause is a huge reduction in confidence in the United States. Since Bush took office, our image as a big but genial giant has been replaced with the perception of a crazed bully.

That's actually good news, if we can survive the remaining eight months of the Bush, Jr. administration. No matter which of the three remaining presidential candidates takes the oath of office next January, the rest of the world is bound to look upon the change as an improvement. I fully expect the price of gold to come down significantly as a result, and the cost of gasoline, as well as that of wheat and rice and the other commodities that have been skyrocketing, should come down some as well.

The bad news is that gasoline is really going to cost more, in dollars or gold or whatever measure, in years to come. We've used about half of the easily-recoverable oil in the world, and demand will continue to go up.

Nonetheless, the end of the long Bush nightmare should give us an economic breather as well as a return of sanity.

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