The Silence of the Hams

Why the deafening silence of the University of Chicago's Economics Dept.?

This article explains how "gougeonomics" not "economics" offers a better explanation of economic turmoil than neoclassical economics.  Gougeonomic theory explains why bankers are getting huge bonus payouts for destroying the economy, driving us out of work, doubling our credit card rates, repossessing our homes, and refusing to do what they are supposed to be in business to do ... i.e. make loans.

Gougeonomic Theory is also used extensively by UCAN's Big Oil Hog to explain irrational price movements in gasoline and oil markets.  

Five years

For five long years the Big Oil Hog has made its annual economic predictions with a dazzling record of 100% accuracy. It even predicted the massive slide in gas prices prior to the 2006 elections, and it did it using a novel new theory of economics called "gougeonomics."

Every February 2, (Ground Hog Day), the infamous Big Oil Hog has appeared  to seek out his shadow at Hogger's Knob, San Diego.  Once the "Oracle of Pork's" prediction is translated from its native Pig Latin, it means either six months of higher oil and gas prices, or a welcome respite from the tyranny of the oil companies. 

Listen up, CNBC, because the Big Oil Hog's predictions are news. Big news. Yet given the Big Oil Hog's astonishing track record, one can't help but wonder about the silence of the University of Chicago.  Obviously as a tool of the mainstream media, Good Morning America's annual boycotting of event is utterly predictable.  But with a record of accuracy that defies all odds, you would think the Pink Porker of Petroleum's price predictions would garner the attention of the Chicago School.

So again: Why the silence?

Could it be that a wisp of the smoke of academic jealousy has entered the hallowed halls at U of C ?

It's possible. After all, when UCAN makes a prediction on future prices, we do not use classical economics. This is because the "rules of economics" have failed. This is especially true of the neoclassical economics taught at the Chicago School. 

After years of study, UCAN has created a new school of economic thinking called "gougeonomics."  It is this fundamental understanding of the principles of gougeonomics that allows the Oil Hog to enjoy its record of 100% accuracy in its predictions regarding commodity prices for oil and gasoline. Gougeonomic Theory explains irrational price movements in markets where the prices are rigged or manipulated, such as the New York Mercantile Exchange.

Gougeonomics explained

The biggest difference between a market economy and a gougeonomy are that in a market economy, you have competitors and competition that eventually has an effect on retail prices.

In a gougeonomy, however, the market consists of a naturally evolved oligarchical pricing structure where the price of a commodity or service is determined not by supply and demand, but rather, by "demand and supply" where the oligarchy (or oiligarchy if you prefer),  supplies less product and demands more money for it.

The theory of gougeonomics first came into being as a hypothesis during the California Electricity Crisis of 1999-2000 when former monopoly energy suppliers were required to compete under electric deregulation.   The fatal flaw of electric deregulation was the idea among regulators that energy companies "Like to compete."  This faulty assumption created a marketplace where the suppliers of natural gas and electricity routinely restricted supplies in order to drive up the price. 

These energy suppliers learned that by limiting the supply of energy, they could quickly make from ten to twenty times as much profit per unit of energy sold. California was plunged into rolling blackouts because the energy companies were intentionally shutting off power in order to drive up the price. Essentially, the rolling blackouts were in reality "rolling blackmail," caused by an overly consolidated energy industry.

The fatal flaw of free market economists

In retrospect, the theory of gougeonomics, not the neoclassical economics of the Chicago School prevailed.  The free marketeers could not accept the idea that energy companies would cooperate instead of compete. Despite mountains of evidence of price-fixing, price manipulation, gouging, and collusion, many still believe, wrongly, that the reason behind the electric crisis was a fundamental shortage of electricity. They believe, wrongly, that the wisdom of the "hidden hand of the marketplace" as espoused by Adam Smith would stabilize dysfunctional markets.  It didn't. The shortages and rolling blackouts were created by a dysfunctional market that had a perverse incentive to not compete.

The genesis of the  Gougeonomic Theory

Gougeonomic Theory was first developed by UCAN's Oil and Gasoline Analyst, Charles Langley, after watching the manipulation of gasoline prices in Southern California. The theory asserts that in a gougeonomy (i.e. a dysfunctional market)  the corporation that supplies the least amount of product at the highest price with the worst customer service will be victorious.

It isn't fair, it isn't pretty, and it isn't just. Nor is it eloquent, but in a gougeonomy, as UCAN's Executive Director Michael Shames explains, "The hidden hand is in the cookie jar." And ultimately, instead of embracing reality, the mainstream economists cling to their dogmatic beliefs that "supply and demand" actually sets oil and gas prices, and that our financial markets will self-regulate through competition. They do not.  But saying this out loud is to scream that God is Dead in the Church of Economics, or to declare that the earth is not the center of the universe in the time of Copernicus.

Gougeonomic Theory offers the best explanation for  the complete collapse of our banking system

With the recent collapse of the nation's banks and investment houses, and the unprecedented public subsidies of the nation's largest banks, the Theory of Gougeonomics is more relevant than ever.

You may have asked your self these questions:

"Why are banking executives who are proven failures getting paid so well?"

Or, "Why are bankrupt firms, the same companies that deprived me of my life savings, my job, and my home, being rewarded with multi-billion dollar welfare payments from the government?"

Viewed through the myopic lens of the Chicago School, these ugly realities don't make sense. That's because the Chicago School embraces a theory of finance and banking called the "Efficient Market Hypothesis," which, in a nutshell, asserts that financial markets can not be gamed because the market is inherently wise.

Yet if anything proves the failure of the Chicago School, it is the complete meltdown of the global economy.

 If the Chicago School's idea of  "supply and demand" really did work, then AIG, Goldman Sachs, Morgan Stanley, and JP Morgan would all be out of business.  These firms are morally, ethically, and financially bankrupt.  What's more, these four institutiions are complete financial and business failures. This is an undisputed fact. Yet in the first quarter of 2010, the top executives at these instutions got record salaries and huge bonus payouts. According to Bloomberg News, the money these executives have made has increased by 60%.

Ordinary economics doesn't explain why these failed losers are being  rewarded ... but gougeonomics does.

Gougeonomics explains this phenomona of rewarding failure elegantly. Remember, in a previous paragraph we explain that in a gougeonomy, the market rewards the vendors who supply the least amount of product at the highest price with the worst possible service.

Now look again at who is prospering in this economy. Is it efficient corporations?

No. It is the same bankers who ruined it. 

Why? because these bankers are supplying less product at higher prices with horrible service. And because we have a gougeonomy instead of a free market, these failed bankers are prospering.

No wonder the University of Chicago is silent. It could be a victim of gougeonomics, too, where the worst students, with the lowest performance are commanding the highest pay as faculty members.

Enough said.

UPDATE: Toyota recalls 3.8 million Toyota and Lexus vehicles, according to Channel 10 News.

A fatal crash in Santee, California, that killed four people, has prompted Toyota to issue a mandatory inspection alert of all Lexus and Toyota vehicles. The vehicle involved in the accident was a 2009 Lexus ES 350.

Toyota is ordering mandatory inspections of all Toyota and Lexus vehicles after an improperly installed floor mat was linked to a crash that killed four people last month near Santee, California. One of the victims was a California Highway Patrolman, who was driving the vehicle.

A frantic passenger in the car told a dispatcher that the car was traveling at 120 mph and that the accelerator was stuck.

According to an article in the Union-Tribune, Toyota recommends that vehicle owners should check their floor mats to make sure that either the carpet or rubber mat is properly secured and clipped to the floor.

In 2007, Toyota issued a recall for some of its mats due to complaints about the mats slipping forward and trapping the gas pedal.

Consumers may take their vehicles to dealers for inspection and cars will be inspected when brought in for service as well.

"We urge all other automakers, dealers, vehicle owners, and the independent service and car wash industries to assure that any floor mat, whether factory or aftermarket, is correct for the vehicle and properly installed and secured," said officials of Toyota Motor Sales USA in a statement.

In what is perhaps the most exciting energy development of 2009, UCSD is coordinating a multi-agency effort to develop substitutes for gasoline, diesel and ethanol at a cost of as little as $2 a gallon. In fact, this research is so powerful - so exciting - and so deserving of your support that I'm reluctant to write another word about this.  JUST GO THERE NOW. In terms of national security, global wealth, and historical importance, this urgent research may be the most important scientific effort since the Manhattan Project ... and it all revolves around using San Diego's sunshine and abundantly available brackish water supplies to grow algae -- one of the most basic life forms on the planet. Best of all, Algae is literally a "green" fuel that does far less damage to the environment than hydrocarbons derived from oil or coal.

If you are concerned about breaking America's growing dependency on environmentally toxic imported oil from countries that loathe us, then VISIT SD-CAB, the San Diego Center for Algae Biotechnology, NOW.

"Pay-Per-Mile" automotive tax proposal delivers "More Smiles Per Mile" to Big Oil, but for motorists, it's highway robbery.

Oregon's Governor Theodore Kulongoski is studying a horrifically bad tax concept that is little more than a love-letter to Big Oil.  He wants the state to study the idea of taxing drivers for using less fuel.

We call it the "More Smiles Per Mile" tax for the oil industry, because despite claims to the contrary, this tax will ultimately reward Hummer drivers and other gas hogs by taxing vehicles based on the number of miles they travel. 

California looked at this road tax a few years ago and decided to pass. But now, according to an article in today's St. Louis Dispatch, Texas, Pennsylvania, Minnesota, and Ohio are also contemplating Big Oil's "Smiles Per Mile" tax concept.

Here's the basic idea: Instead of taxing users based on how much gas they use, the tax will be based on how many miles you travel. When you pull up to the pump, the GPS navigational system in your car will be accessed by the gas station. The pump will calculate how many miles you have traveled, and where you have traveled, and tax you accordingly.  But that's not all: You will be charged extra if you drove during rush hour, or through a congested area.

Big Oil loves the idea because it rewards wastefulness. And Big Government? Well, they'll be able to keep records on where your vehicle has traveled at all times using a government-mandated GPS locator. This is wonderful news for law-and-order types who want to see a police state where all citizens are monitored at all times.

According to an article in today's St. Louis Dispatch:

"if you want to drive a Hummer, or whatever that vehicle might be 30 years from today, at 7:30 in the morning on I-70, you're going to pay a higher rate  ..." 

"... In Oregon, Gov. Theodore Kulongoski's proposed budget calls for a task force to work out details of the plan. Eventually, GPS devices could be recording every mile driven, and possibly which routes motorists use. Motorists would pay a mileage tax at the pump in place of a gasoline tax. The state tested the concept in 2006 and 2007 with 285 volunteers and a handful of gas stations in Portland, Ore."

Although boosters of the tax say that a Honda Civic driver will pay less than a Hummer driver, the reality is that Big Oil's "Smiles Per Mile"  tax would bring a multiplicity of bad consequences.

8 good reasons why this tax is highway robbery:   
 
1) It will likely reward gas guzzlers. Right now, drivers who use more fuel pay more in taxes. A cement truck, for example, gets terrible mileage. Because it is taxed on a per gallon basis, it pays more in taxes. And a Hummer, a cement truck, or a Chevy Silverado should pay more in taxes because the weight of these vehicles does tremendous damage to the roads.

2) It punishes fuel-efficient drivers. This tax was designed by the oil industry to punish people who drive economy cars. If you're getting 50 miles per gallon because you are driving carefully, and using a light-weight fuel efficient vehicle, such as a Toyota Prius or Honda Insight, you are currently rewarded with a lower fuel bill. This tax punishes you by charging you based on the miles of road you travel. It is therefore regressive. Proponents say they will tax a Civic less, but let's face it, this tax is tailor-made by the oil industry to punish drivers and businesses that are fuel-efficient.

3) It creates a massive bureaucracy. Under the plan, each vehicle, or each class of vehicle, will be taxed differently. It will take an army of meddling bureaucrats and tax collectors to create the tax code and enforce it. And over the years different business groups will lobby for discounts and exceptions. The only people who won't get discounts or exceptions will be YOU, the voter.

4) It's a horrific invasion of privacy: Your vehicle will constantly be monitored by the government. The government will know when, and at what time, you visted your psychiatrist. It will know when, and at what time, you attended that 12-step program, or stopped at your local church to pray. They may even report this data to your insurance company, which would love to raise your rates based on driving patterns, too.

5) Working people will be punished. If you work for a living and can't afford to live close to your office, like the corporate fatcats that invented this disastrous tax, you will pay more for driving during rush hour. That's right: If you are driving your vehicle during certain hours, you will pay a higher tax.

6) It will make it impossible to compare gas prices. Under this system, you won't know what you are going to pay for gas until after you buy your gas. If the proponents of this disaster get their way, you'll pay a variable rate depending on where you've driven, and at what time you've driven.

7) It will be impossible to audit.  How do you know you are being charged fairly by the retailer or the government when you are being taxed a different rate for the number of miles you've traveled, the time you've traveled, and the locations you've visited? 

Estimating your taxes will be almost impossible without a spreadsheet. And because the taxes will be so complicated, it will make motorists and businesses vulnerable to fraud, overcharges, and abuse.

8) It replaces the gas tax. Ultimately, this proposal is designed to eliminate taxes on gasoline, by replacing them with taxes per mile.  No wonder the oil industry is smiling.

This is one road tax that should be kicked to the curb. Otherwise,  the Gas Hogs will be lining up at the government trough at your expense.