Tim Sullivan

To the editor,

"Maybe" "we decide to act". Whining about gasoline prices is so lame. America has achieved the glorious globalization that the oligarchy so passionately argued for. In 2007 the U.S. and European Union consumed 45-percent of world oil production. The U.S. consumed 26-percent. Third was of course China at 6-percent. The American male loves to drive pickups. They also love Rush, O'Rielly and even Kudlow. These people argue for the oligarchy and generate male testosterone. They argue that our current sorry state of economic affairs is just transitionary. They say that huge trade and budget deficits are not that influential and not harmful when defined as a percentage of our nation's GDP.

Gas prices are very high for three reasons. The most obvious is the dollar being destroyed by the "DUMMYA" and his henchman Ben the Dollar Slayer.

In the first case for this the government has attempted to artificially lower interest rates to slow economic decline and bail out their over-leveraged business tycoon friends. Under the trickle-down theory, the Wal-Mart employee also benefits from this. This decline is mostly due to the national collapse of the housing market. The problem with this is that anyone could buy Euros or other foreign currency and still get a higher rate of interest. But because of this they would also see a marked increase in the value of that asset as others followed them and drove up the price of the foreign currencies. Over the medium term we find that real interest rates consumers have to pay are going higher in anticipation of inflation.

The second effect goes to the heart of our national nightmare. The belief in the Laffer Curve as a solution to economic stagnation. Paper money does not grow on trees rather in cotton fields. Almost all of the world's major currencies are printed on linen. The US over 5 years ago embarked on a project in the Middle East that has cost $2-3 trillion dollars so far. At home Medicare and other spending has increased dramatically. Some how we still cling to the "truth" the current politicians adhere to that, "cutting taxes and increasing spending" is a solution. Most of us who get a tax refund don't get currency just a check. In order to support this national profligacy the U.S. increased it's linen "money" supply by 15.8-percent in 2007 alone. This policy has created the war is good for the economy prosperity of the past years. But something happened in conjunction with this. A thing called globalization. We took our inflation and exported it to China and the world to stock the shelves of Wal-Mart. In order to absorb all this U.S. money the government of China had to increase their money supply, in 2007 alone by 18-percent, and in Hong Kong part of China by 31-percent. At the same time we shipped money off to Mexico, and the rest of the world to supply the refineries of Exxon-Mobil. This created a huge glut of linen money all over the world. The Chinese figured they would be better off buying stuff for the linen. China thought the U.S. strategic petroleum reserve was an excellent idea and started building one of their own. They started buying up the world's mineral resources and increased their oil, coal and natural gas consumption dramatically. They pumped tons of linen into Brazil, who increased their money supply by 17-percent, Australia, who increased 20-percent, and Canada, who increased 13-percent. At the same time India emerged mimicking China's industrialization and pursued all the same world resources. India then increased their currency supply by 21-percent. All this money created in just one year. That's prosperity! Suddenly there was an awful lot of linen money in the world and the neolithic laws of supply and demand took over. Now everyone is trying to dump this linen money for something that has intrinsic value. That has driven the world boom in commodities. They are divided into the most valuable and less valuable. The consumables like oil, natural gas, met coal. therm coal, rice, corn and wheat, fertilizer and the less valuable non-consumable/recyclables like steel, gold, silver, copper,platinum etc.

So the U.S. dollar weakness is due to world inflation mostly fed by U.S. profligacy and then further weakened by the U.S. government's tax and spending policies. It is lamentable that our current choices for future leadership will never tell the truth about this situation and a possible mitigating response. Instead they all preach the Laffer curve as a solution. A solution for getting enough votes to get elected.

The third issue is in the oil market itself. Now we find that Mexico has seen a 1st quarter 7.8-percent decline in oil production. Production in Russia fell in 2007 by 1-percent. This was the first decline since the reorganization after their huge credit defaults of the '90s. There is political strife increasing markedly across the world. We may reach effective "Peak Oil" sooner than real peak oil. Peak oil is defined as the time frame in which the amount of the planet's proved and probable oil reserves starts to decline instead of grow to meet demand. The part of the world that has oil has either confiscated it or imposed ever higher taxes for it's extraction and depletion. Demand has continued to rise. If you have a savings account with $1,200 and have an unusual expense that depletes it by $500, you probably want to take out another $400? Of course you won't feel too good about your cash reserves if you spend that money on a trip to Fox Woods. So those with the oil have challenged a key tenant of the Laffer curve. That is, if you tax something you will get less of it. This is good economic policy for those having the oil. That is, discourage production as the un-tapped resource will increase in value exponentially over time. As a result of our exporting profligacy and inflation we see food shortages developing worldwide. This has been compounded by worldwide environmental degradation and drought. This has been seen in food riots worldwide.

This world wide strife including the Iraq situation is curbing oil production.

There has been a national and international proliferation of an investment vehicle called the ETF. This allows people with even small amounts of linen money to purchase oil who have no intent to ever take delivery or use it. So oil as a commodity along with just about any commodity has been monetarized. Power plants in South Africa shutting due to fuel shortages? Better convert linen to some KOL. This has driven the price of crude (USO) ever higher. Now we find the same is happening to natural gas (UNG & FCG) — even fresh water resources for agriculture (PHO). It seems that Canada is the Saudi Arabia of tar sands. As long as oil is over $80 per barrel, oil sands are an economic way to mine oil. Natural gas prices have soared due to Canada, who supplied 15-percent of our consumption diverting large amounts of gas to these projects. While the consumer fumes at the pump the refiner is stuck with a problem. Refiners have to pay way more for crude and the higher the price the less they make on the component of it that ends as gasoline. This is the crack spread. They have no profit motive to increase production as long as they have to pay more for crude. This leads to the price of gasoline going ever higher. The higher price is curbing demand and the refiner has got to be careful as the price of crude can drop as fast as it rises. Best not to make too much gasoline and not be able to make a profit. They are not as foolish as the Bear Stearns' of the world. Bear Stearns decided that as long as they could make money selling securities that were still going up in value they should dramatically increase that kind of business. While their shareholders lost their money, the BSC bond holders would like to thank all of you Rush and O'Reilly fans for helping them out of a terrible jam. If there is a popping of the crude oil bubble the refiners could be left selling stored inventories of distillates at less than the cost of the production. Countries exporting oil don't want much more for their oil in terms of value. They just want more linen that has declined more than 30-percent in value since the price was $50 per barrel.

This week Cosco and some other wholesaler outlets started limiting purchases of 20-100 pound bags of rice to four per customer. Got DBA or MOO? Next time you fill your gas tank on your way home to dinner, think about the meal you are going to consume — enough calories to feed a family in Cairo for a week! Nothing to worry about here until the ATMs start kicking out $50 bills! The world's single largest entity accounting for world oil consumption is the U.S. Navy. What would we do about that? We could start collecting

FICA tax on unearned income? Of course not!

Tim Sullivan

Gilford