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America Will Handle Reality; Or Reality Will Handle America

There is an old Classic Rock standard that the English Group “The Kinks” wrote about the death of Elvis Presley. The song “Rock and Roll Fantasy,”

touches me emotionally. Not because I accept the MSM propaganda that Elvis is actually dead (just kidding), but rather because it somehow speaks to a destructive and potentially fatal mindset of an entire generation.

The people who lead us and make decisions for our society live in that same Rock and Roll Fantasy. To the extent that this fantasy differs from the big, bad real world, our nation’s policies are therefore in error. These errors compound, propagate, and like the interest payments on a maxed-out credit card, they deprive us of a viable future. The examples of how this happens are, depressing and manifold across all areas in which our society is forced to engage reality.

Steve “Vladimir” Maley posted an exceptional diary discussing his views on the Obama Administration’s Portfolio of Fail Energy Policy. He doesn’t believe they are evil, but rather in fundamental error. In today’s effort I will take his analysis one step further. Barack Obama, the US Congress and The Federal Reserve, exactly as Mr. Maley impugns, make a litany of unforced errors. President Obama does so because he does not wish to face reality. He therefore wishes it away and makes policy as if that reality no longer existed.

As Steve presented, Mr. Obama believes that higher energy prices will make people choose a less energy intensive lifestyle and therefore drive a national revival of thrift, ingenuity and environmental revival. Take away the unintended consequences, and that Barack Obama is one heroic and legendary President. Today really can be the day the oceans begin to recede, America! Except for one problem: Mr. Logic tells us that it can’t.

As I stated above, the extent to which our fantasy of alternative energy and ecologically sustainable lifestyles differs from the physical reality, roughly defined by the Laws of Thermodynamics, we all suffer. The mechanism by which this suffering becomes manifest consists of the unintended consequences of the policies enacted – what economists refer to as negative externalities.

The tandem foolish decisions to turn a large proportion of our corn harvest into ethanol, and to radically reduce the interest rates charged by The US Federal Reserve, will not bring down a Biblical plague of locusts. It will, however, make agricultural commodities reach price equilibrium at a higher level. The resulting expenses are passed on to those of us who are vulnerable to spikes in food prices. In places such as Egypt, India, China, and Tunisia, the people are visited by iniquitous consequences.

The governments, economies and lives of people in foreign countries are not the only casualties of our current President’s surreal desire to rapidly move America away from a hydrocarbon economy. As Barack Obama has spent his entire term in office restricting the access of domestic producers to American Petroleum reserves, he has driven up the price of a barrel of oil precipitously since he has taken office. The increase has run from $37.00 to $86.20. (This leaves out the Libya Bump, as the chart was dated 2/18/2011.)

Though the prices in a deflationary economy tend to be sticky downwards, the producers of petroleum products are now gradually succeeding in passing the increased oil through to drivers in the form of increased gasoline prices. From 1/31/2009 (the approximate date of Barack Obama’s inauguration) until 2/19/2011, the price of a gallon of gasoline has increased from $1.86 to $3.17. (Again, the Libya Bump in gas and oil prices was deliberately ignored.)

Thus, a barrel of oil has increased in price by 133%. The cost of a gallon of gasoline has gone up 70.4%. If we assume that gasoline retailers have instantaneous price elasticity to the cost of a barrel of oil, we can estimate that oil producers are passing 53% of their cost increases on to drivers. Assuming a 1 month lag between the purchase of more expensive oil and the sale of a more expensive gallon of gas, and the American driver is in for considerable pain. Again, this assumes the American driver is in for considerable pain regardless of what happens over the weekend to the Mad Dog of Tripoli.

Then, once the gallon of gas gets increasingly expensive, Barack Obama’s glorious view of the future gets laid to nines. The amps get unplugged on his Rock and Roll Fantasy. Rural areas, which need to grow the food to increase the supply to combat the commodity inflation that drives up food prices, suffer economic shock. The cost of traversing far distances by internal combustion engine continues to increase. The cost of fueling the tractor precludes the needed increases in planting density to fight the scourge of expensive food. We simply can’t fight the agricultural supply imbalance without burning more diesel fuel to plant the fields.

Congress, The White House and the Federal Reserve can all choose to believe a hundred impossible things before breakfast. Reality will wax unsentimental. It will tax our societal and political enstupidation. When The Pittsburgh Steelers threw interceptions and fumbled in The Super Bowl, The Green Bay Packers took the ball and shoved it down their throats. Reality will treat the Rock and Roll Fantasy of American Exceptionalism with the same disdain and contempt.

Barack Obama’s election to The Presidency will rightly be remembered as a great moment in American History. Unless he wakes up and realizes he is a Chief Executive; not America’s Dungeon Master, his Presidency will go down as a historical disaster for the American nation. Rock and Roll Fantasies are the parlance of over-privileged, wealthy adolescents. America’s problems must be solved by hard-minded adults. America will handle reality; or reality will enjoy handling us.

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