Ask any economist and they will tell you that government intervention does not work in the long run in helping the economy. For example, government subsidies may have a short term benefit of helping people out, but it ends harming more than it helps. In systems analysis, this is called shifting the burden....I like to call it short term thinking...or I just want to fell good now...or poor emotional intelligence.
Why do I bring this up? I am scared. As an environmental leader, I believe developing new sources of energy. I believe that we all need to do our part including corporations, government and individuals. However, in the speeches I am hearing by the Presidential hopefuls, I hear them taking the short term feel good approach. Let's tax the oil companies using a windfall tax on their profits and use that money to invest in solar, wind and biofuels.
As a very well educated person, all I can say is Huh? Why do I need the government to invest in solar, wind and biofuels? I really don't want government doing the job of business. I want government to ensure that regulations are followed. I want government to ensure that are market system is being followed. I want government to provide stability for the economic system to work properly.
I do not want them trying to be the most efficient and effective supplier of demand. This sounds a little concerning to me. If it does not sound scary to you I would think about it.
What do we think these companies do with their earnings? Basic corportae finance classes will tell you they don't and can't hoard it. They reinvest it, they buyback shares or they issue dividends. If they don;t do this well or properly people will not invest in them. And if they do it well, investors can choose to invest in businesses like solar, wind and biofuels. I don't need the government taking cash from companies that are part of my mutual funds and 401K resulting in lower earnings of these companies and less earning for me. I don;t need the government to invest this cash in solar, wind and biofuels. I can do this myself. And I do not need to pay the burden that will have to be born to process this tax on corporations.
I care too much about the environment and our future to just clap mindlessly when our politicians blurt out words focused on the short term because they know what will push people's buttons. I am scared that people who truly care about the future are being confused between real solutions and short term thinking.
I did some research on what drives the price of oil. I found something very enlightening. Oil prices are driven by many factors like supply, demand, war etc etc....but what I didn't really think about is the huge affect traders and investors have on oil prices. Oil is just like any other investment or stock. People trade it on paper and then sell it to make money. Just like any stock out there.
So, with the challenges in the market these days and with the dollar challenges, investors have been trading oil futures and options. This demand for oil futures has itself driven up the price of oil Why would they buy oil futures?? Maybe because the rest of the places to invest in are not that attractive.
So I realize things are not so simple as our future possible leaders want us to think. They are treating us like children trying to get us all up in arms without explaining the true dynamics of what is going on. Is it the oil companies or is it just the state of our economy?
I remember hearing about ethanol and how we should be investing more in ethanol as a fuel. What nobody professing this every said or maybe understood is that ethanol comes from corn....and corn feeds our livetock and uses land that could grow food. So when ethanol demand goes up, available supply of corn goes down and so does the available land....then the price of food goes up because corn and land cost more.
I also did some research on these oil companies...and many of them are investing in solar, wind and biofuels. So in summary, let's harness our fantastic free market system by making educated, mindful decisions of how we invest our capital. Let's not let short term thinking cause consequences which those professing these governmental interventions have no understanding about.
Taxes takes money away from comapanies and investors like you and I. Interventions like this do not work and will have unintended consequences. Stand guard at the entrance to your decisions. Think them thoroughly. Do not let other's banter about change, fight for you and the evil companies which represent our great free system, make the decisions of what is best for you.
The environment is not simple. Our market is not simple. Why then are politicians acting like it is. How soon they forget how ethanol is backfiring.
I believe government should set the rules and then let the corporations, customers and investors drive the future. This is what we should hear about. This is our future. We are the leaders.
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