Last week, I received a marketing letter with the headline, “America on the verge of collapse.” The author predicted that gas prices were about to spike to $10 per gallon due to Middle Eastern turmoil and the Fed’s inflationary policies.
I don’t buy it at all. Even though I do think gasoline prices will stay high, such sky-is-falling predications about the consequences not only are unnecessarily alarmist but outright wrong.
Here are the simple facts. Oil prices rose after Iran announced cutting off oil to England and France. However, these two countries import only 1-3% of their oil from Iran, so Iran’s decision to cut off its supply of oil to those two countries only will have a marginal impact.
In addition, there is no shortage of oil or any looming disruption of supply on the horizon. And President Obama, desperate to be re-elected, isn’t going to risk a big war with Iran, which would push gas prices sharply higher — and end his re-election bid.
I am not the only one who thinks that the concerns about the heightened price of oil are overblown. The lead story on the Yahoo! Finance website earlier today took a view similar to mine. The article explained that the United States, the world’s largest consumer of gasoline, is much less likely to be the victim of high gas prices than it was a few years ago. The article explained: corporate and personal balance sheets are in much better shape to absorb rising fuel costs; the United States is a bigger producer of oil than it was a few years ago; Americans are driving less and using less gasoline than in the past; and the internal combustion engine produced today is significantly more fuel efficient than engines of the past.
Of greater concern to me is the Fed’s never-ending policy of easy money and a weak dollar, which is sending commodity prices higher. Higher consumer prices aren’t far behind. Right now, consumer prices already are rising at an official 4% clip and, according to Shadow Government Statistics, the real consumer price inflation is close to 6%.
Be sure to read my feature “You Blew It!” I’ll plan to have a new one for you every week. The purpose is to point out a bad decision, a foolish action or an ill-fated statement by a public official, business leader or investment guru. I have used the phrase within my family for years and they once printed t-shirts for a reunion with those exact words on each one. They learned to take my constructive criticism with a sense of humor and I hope you do, too. My intent is not to ridicule anyone but to point out a mistake that could be corrected, much as advice from a trainer or a coach can turn a faltering athlete into a world champion.
In short, Mr. SEC, “You Blew It!”
It is sad that SEC leaders won’t apologize. Last year, I spoke at an annual accountants’ convention at Utah State University, where the former chief accountant for the SEC spoke for an hour on the state of the SEC. Not once in his entire talk did he mention the Madoff scandal. When I mentioned this sin of omission, he threw a fit, refused to apologize, and said the American people ought to thank him and the SEC for their work! Talk about hubris.
Congress also blew it. After the Madoff scandal, Congress rewarded the SEC’s incompetence by doubling its budget! The agency now spends more time going after legitimate firms, costing Wall Street firms millions of dollars to defend themselves against an abusive agency. So, the SEC commits two sins: the sin of omission (missing real frauds) and the sin of commission (going after legitimate firms).
The SEC creates a false sense of security, making it easier, not harder, for bad money managers to commit investment fraud. The best solution is to abolish the SEC, so that investors will be more wary of Wall Street and depend on better investigative techniques by the financial media to uncover fraud and deception.
The SEC’s Two Sins
Earlier this month, I was touring the exhibit hall at the Orlando Money Show and I saw that the Securities & Exchange Commission (SEC) had a booth there to “educate investors.”
I walked up to the two SEC representatives and facetiously said, “I hear this is the place to buy a copy of Harry Markopolos’s book “No One Would Listen.” Can I buy a copy?” They had an incredulous look. Markopolos’s book “No One Would Listen” is the investigator’s story about the worst scandal in SEC history — the agency’s failure to detect the Bernie Madoff Ponzi scheme in 2008 that caused individual investors and charitable organizations to lose more than $60 billion.
Needless to say, the two SEC spokespersons were not selling any copies of the “No One Would Listen” book.
However, they proudly displayed a handout for investors called “Ponzi Schemes — Frequently Asked Questions.” The four-page information sheet prominently mentioned that the SEC charged Madoff and his firm in December 2008 with “securities fraud for the multi-billion dollar Ponzi scheme,” but oddly enough, never apologized anywhere for having failed to uncover the scandal, even though Harry Markpolos had warned the SEC numerous times as far back as 2000. SEC officials only charged Madoff after he had confessed!
Yours for peace, prosperity, and liberty, AEIOU,
Mark Skousen, Ph.D