An oily deception about the dollar

Section:

By Chris Powell
Journal Inquirer, Manchester, Connecticut
Saturday, June 20, 2008

http://www.journalinquirer.com/articles/2008/06/21/chris_powell/doc485c2...

For mistaking symptoms for causes, it would be hard to outdo Connecticut U.S. Sen. Joseph I. Lieberman and Maine Sen. Susan Collins with their proposal to prohibit pension funds and government agencies from investing in commodities. Such investment, the senators claim, constitutes speculation and is largely responsible for the recent surge in commodity prices and general price inflation.

Of course there is always speculation in all markets, but Lieberman and Collins fail to ask the crucial question in regard to their own issue: Why the surge in commodities now?

Lieberman and Collins failed to ask a similar question in regard to the explosion of housing prices over the last decade, where speculation far exceeded anything in commodities lately, speculation in which so many of the senators' own constituents engaged, some of them even showing up on television programs like "Flip This House." That speculation drove home ownership beyond the reach of many other constituents of the senators, but these constituents had not yet made it to the middle class and so were expendable.

But if the crucial question is to be asked, it might first reveal, as with housing, that prices were rising dramatically long before pension funds got interested in the commodities markets generally and the oil market particularly. Indeed, prices for commodities for which there are no futures markets at all, no ready vehicles for institutional fund investment or speculation, have been soaring too.

No, what is being manifested in the commodity markets is to a great extent the flight from the U.S. dollar, which is devaluing from vast overissuance and deficits incurred to finance imperial war and expensive social programs, and from government interest rates that are set far below even the official rate of inflation, which underreports inflation by 300 percent or more. In the last two years alone the dollar has depreciated by 15 percent against the index of world currencies. And since the creation of the Federal Reserve system in 1913, the dollar has depreciated by about 95 percent, which suggests that currency devaluation is actually government policy.

While everyone is agitated about what seems to be the dramatically rising price of oil, in terms of the European currency, the euro, and gold, the once and possibly future world currency, the price of oil has been nearly constant in recent years.

That is, commodities are not soaring; the dollar is plunging.

So in seeking to prohibit pension funds from investing in commodities, in necessities, in real goods, Lieberman and Collins would punish not just supposed speculators but also ordinary working people, whose pension fund investments in commodities may be the only practical way for them to protect themselves against dollar devaluation. The senators are also seeking to protect themselves against any doubt that the United States can afford its empire and can afford to bestow on the public a largesse that nobody pays for.

As it turns out, the sharp rise in prices and the accelerating decline in their standard of living are exactly how Americans are paying for the deceptive politics of Lieberman and Collins.

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Chris Powell is managing editor of the Journal Inquirer.

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