The oil “shocks” of the 2000s were once again a weak dollar phenomenon of oil rising in terms of a measure (the dollar) that was shrinking. It shouldn’t surprise anyone at this point to know that gold soared in the ‘70s and ‘2000s, while it plummeted in the ‘80s and ‘90s. When gold is rising it’s a signal that the currency in which it’s priced is falling, and when gold is falling, that signals currency strength. Gold is the constant that has historically been used as an objective measure of a currency’s health or lack thereof. There’s no mystery about what happened: oil priced in dollars became “expensive” beginning in the early ‘2000s as the value of the dollar declined. The above is not a serious presumption, and it’s an insult to an oil industry that's brought so much abundant good to the world since the 19th century. This person would then have to believe that the oil industry yet again had its finger on the global consumption pulse in the ‘80s and ‘90s such that oil was cheap for two decades, only for the industry to coincidentally become “stupid” again around 2001 to all of our detriment. To believe otherwise, as in to presume that the oil boom of recent vintage was rooted in a supply shortfall would be to believe that in the ‘60s global oil producers gauged consumption perfectly such that oil was flat and cheap, but that in the ‘70s those same producers completely missed the boat on the way to oil shocks. Looked at through the prism of oil and the oil boom from the 2000s in commodity locales, the high prices that so substantially boosted the near-term economic fortunes of Texas and North Dakota were very clearly a creation of policy in favor of a devalued dollar. Hazlitt explained in Chapter 15 that the “whole argument” of Economics In One Lesson “may be summed up in the statement that in studying the effects of any given economic proposal we must trace not merely the immediate results but the results in the long run, not merely the primary consequences but the secondary consequences,” and most important of all with this op-ed in mind, “not merely the effects on some special group but the effects on everyone.” To begin, it’s useful to bring up Hazlitt’s essential observation that “What is harmful or disastrous to an individual must be equally harmful or disastrous to the collection of individuals that make up a nation.” Economies aren’t blobs, they’re simply individuals. Suffice it to say, were Hazlitt around he would have fully understood why something that was initially so profoundly good for Texas and North Dakota was so bad for the rest of the U.S. But with brevity somewhat in mind, Hazlitt’s writings will be used here to explain the economic implications of the oil boom and bust that took place in commodity locales like Texas and North Dakota over the last decade or so. Hazlitt’s all-too-uncommon common sense approach to economic policy could be applied to all manner of issues from the past and present, and the Hazlitt Lecture this Thursday will show why that’s true.
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