Posted by
cavalier973 on Thursday, July 31, 2008 10:06:58 PM
I've been meaning to comment on this for some time now, but Sean Hannity, taking a cue from T. Boone Pickens, has been claiming that our purchase of Saudi oil has been the "largest wealth transfer in history." Really.
Now Hannity may have a point if we were being forced by the Saudis to purchase their oil, then forced to pour the oil down the drain immediately upon receipt.
But that's not what is happening.
Imagine a baker who buys all his wheat from one farmer, who does not in return buy anything from the baker. Hannity could say that this is a "wealth transfer" from the baker to the farmer; but the baker would know better. He turns all that grain into bread and cakes and doughnuts, for which he gets a handsome profit. He takes the money from his sales, and buys more grain. It's called the market.
In the same way, when we buy oil from the Saudis, or the Russians, or whoever, we don't meet the tanker at the docks and then pour the oil straight into the ocean; when we get the oil, we immediately turn it into something more valuable, whether it's plastic components or FedEx deliveries. We make money off all that oil we purchase from the Saudis. We are engaged in what's known as "adding value" to the oil we purchase. Even if one would like to term our purchase of Saudi oil as a "wealth transfer" from us to the Saudis, one must realize that we are in a never-ending process of wealth creation. So we can safely transfer all that wealth to the Saudis, and still be better off, because we can always create more wealth.
On a similar note, Glenn Beck is saying on one of his radio commercials that the "housing market stinks." This may be true from a house seller's standpoint, but there are always two sides of a story, even in economics. I doubt that if our current price for a gallon of milk dropped from around $4 to under $2, that Mr. Beck would be saying that the "milk market stinks." It's all a matter of whose perspective you are taking.
I think that these talk radio hosts need to at least read Dr. Sowell's Basic Economics before continuing to comment on economic matters. For the most part, they seem to get it, but then occasionally go off the deep end. I think this lack of understanding of economics is partly why they keep touting Romney as an economic mavin, when the record shows that Romney, while a good businessman, was not very well acquainted with economic theory. From what I've seen and heard, John McCain has a clearer understanding of economics than Romney has.