From The Founder's Desk
columnist: Walt Thiessen

Topic: Presidential Campaign 2008
Federal Reserve Stimulation and Bush's War Pushing Up Oil Profits

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Exxon Mobil last quarter recorded the highest reported profit ever by a major corporation...nearly $12 billion.

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by Walt Thiessen
(Libertarian)
Friday, February 1, 2008

Many people have been criticized for claiming that Bush's War in Iraq is only about making "his corporate masters" tons of money. While the charge is not completely true, there is now do doubt that it is at least partly true. What is gaining much less attention is the dominant, hidden cause of the price and profit increases: the Federal Reserve Board.

Reuters (among others) is now reporting that Exxon Mobil "on Friday posted the highest-ever quarterly and yearly profits by a U.S. company." The big oil giant posted profits of nearly $12 billion. That's for just one quarter. Calculate that out over the course of a year, and it is the equivalent of earning roughly $46 billion in profits in just one year. While you're mulling on this, remember that this annual amount is roughly 80% of the entire net worth of Microsoft mogul Bill Gates. In other words, Exxon Mobil's brand new record for profits in a quarter make Microsoft's entire operation look tiny by comparison. It's a company with a market capitalization of nearly half a trillion dollars!

Is the product really that much more in demand here in the U.S.? No. Is it really that much more valuable? No. So what's going on?

There is no doubt that the high cost of oil has been driven in part by the Bush administration's War in Iraq and his latest sabre-rattling with Iran. But even more the price rises have been driven by the falling dollar, which in turn has been driven by the interest rate machinations by the Federal Reserve Board over the past 10 years or more, which have thereby driven the hidden inflation tax to absurdly higher levels. There is also no doubt any more that these higher oil prices aren't merely being passed along to gas-buying consumers. They're being marked up considerably by the oil companies, whose business is booming.

This is the "boom" portion of the boom-bust cycle. Big business, which gets first crack at all the money the Federal Reserve creates out of thin air and distributes to its member banks, booms. Then, when the inflating of the money completes its course, the prices have already risen, and the rest of us go bust. Then the Fed cuts the discount rate some more, and the whole cycle begins again.

Oil isn't the only industry that has seen tremendous price rises (and higher profits) over the years that have been directly caused by hidden Federal Reserve machinations. Health care, real estate, and stock market insiders have all also been beneficiaries. By the time we have to pay the piper, these industries have made their cash registers ring, and the rest of us are left trying to make ends meet on meager household budgets with less buying power per dollar that never seem to stretch far enough.

This is what happens when the real inflation rate (as opposed to the official government-reported inflation rate) is in double-digits. No one knows for sure what the exact rate is, but best guesses by many investment analysts put annual inflation in the 10-13% range, possibly even higher. Because the U.S. Government no longer reports accurate inflation numbers, the damage is doubly bad. Not only does it prevent people from knowing what's really happening, but it also makes them think (particularly at the corporate level) that the economy is booming when it's really busting, because without honest, accurate inflation numbers, no one can be sure what exactly is happening at any one time.

Back in 1992, then-Governor Bill Clinton of Arkansas threw his hat into the ring for a run against former President George H.W. Bush. At the time, it seemed a foolish thing to do, because Bush was expected to win re-election handily, in particular because of his popular success with the first Gulf War. But when the economy began to fall apart despite all government attempts to play that fact down, Bush's re-election was doomed. The now famous sign on the wall in Clinton headquarters at the time said simply, "It's the economy stupid."

Fast forward to 2008, and the whole, sick scenario appears to be playing out again. This time, Bush II has completed his eight year abuse of Federal power, and it's Hillary Clinton and not Bill who is the candidate. On the Republican side, the front-runner is John McCain, who is essentially a George W. Bush clone. Conservative pundits are trying to talk themselves into believing that a McCain candidacy will be a strong one, and that he has the best chance of beating Clinton in November, but the fact is that McCain has no rational economic proposals on the table, and once again "it's the economy, stupid."

Of course, it doesn't help Republicans that McCain is also pledging to spend trillions of more dollars we don't have to keep America in Iraq for more than 100 years, thus shoring up Exxon Mobil's already strong profit margins at the expense of the average American. Republican pundits who argue for McCain apparently can't see the relationship under Bush/Fed policy between corporate profits and economic decay, because McCain would be sure to continue the Bush foreign and domestic policy agendas.

Of course, Clinton (and Obama) have nothing to propose that would actually solve these problems, but they also don't need to. All they have to do is present the illusion that they represent the best interests of the poor and working classes, and if the Republican candidate doesn't have any real, tangible solutions to offer, the Democrats will enter the White House in a walk. That's what's likely to happen.

The only prayer that the Republicans have at this point is to wake up and realize that only one of their candidates has the answers to these questions, and he's the candidate that the media and their own party have done everything possible to keep off the political map. His name, of course, is Ron Paul.

The latest attempts to keep Dr. Paul out of the picture have been particularly disgusting. Fox News is now reporting that Rudy Giuliani raised the most money in the fourth quarter of 2007. Paul's name isn't even on the list, despite the fact that he out-raised every Republican candidate including Giuliani by a wide margin. [Note: a few hours after this article was first published, Fox News amended their story to include Dr. Paul's numbers. Kudos to them: at least they made good on this mistake, this time. Now we would all like to see them correct some of their many other mistakes and start including Dr. Paul in the presidential race as part of their ongoing regular and debate coverage.]

But that omission only scratches the surface. There's a fascinating table over at journalists.org that breaks down the amount of news coverage each of the presidential hopefuls have gotten. The article was about a Project For Excellence In Journalism study of campaign coverage during the week of January 21 - 28. It focused on the amount of coverage that the Democrats have been getting, which far outpaces what the Republicans have been getting. But even more interesting is the disparity among the various candidates. I've reproduced the table here, because it's so interesting. Take a look:

Paul supporters will be unsurprised by the amount of press coverage he got, but the results are still quite remarkable. Why did Fred Thompson and Dennis Kucinich of all people get 3.7% and 2.4% of main story coverage while Ron Paul got none? Well, it turns out it's because they dropped out of the race. That's headline news. But during that same week, Ron Paul "officially" finished second in the Louisiana caucuses and in all likelihood probably would have won them if the votes were counted fairly, but his results received no news coverage at all.

Paul did achieve a significant presence in 0.2% of the articles surveyed by the journalist group, but Bill Richardson got 0.2% of coverage as a main newsmaker. What was his news? It was that he hasn't endorsed anyone. Bear in mind, he had already dropped out of the race two weeks beforehand, but because he hadn't endorsed anybody, he received more main coverage than Ron Paul, who almost won a caucus (and would have won in an honest world).

It is no coincidence that Ron Paul is the only candidate who is pointing out the role that the Federal Reserve is playing in our economic woes. What's disturbing is that the media are more concerned with whether or not Obama and Clinton are playing nice than they are about what's happening to the economy, not to mention that they are demonstrating no balance to their overall news reporting.

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2008 Walt Thiessen, all rights reserved.
Published: Friday, February 1, 2008
Last modified: Friday, February 1, 2008

The views expressed in this article are those of Walt Thiessen only and do not represent the views of Nolan Chart, LLC or its affiliates. Walt Thiessen is solely responsible for the contents of this article and is not an employee or otherwise affiliated with Nolan Chart, LLC in his/her role as a columnist.

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