As far as the gas tax, the oil companies are not the only ones reaping the benefits of increased prices. Increased prices mean increased tax revenue from the gas tax. In reality, we are clearly making up any tax breaks the government is gracious enough to give us, in greater fuel tax revenue. I would bet the increase is far greater than the tax breaks. I say it borders on collution. I would even pay some higher taxes on April 15th than higher tax at the pump. I probably pay tax more in the long run at the pump than in income tax. And I would rather be mad one time a year, than everytime I fill up.

Re: reserve ratio:

This is a valid point. I did write implying “that if it were 10%”, and assumed the same ratio as we have in the U.S., for explanatory purposes. In fact, Iceland’s is much lower, which would lead to even more money being created.

Re: Deposit as a direct ratio of the RR:

From “The Economics of Money, Banking, and Financial Markets,” Fifth Edition by Frederic S. Mishkin p. 425: “When the Fed supplies the banking system with $1 of additional reserves, deposits increase by a multiple of this amount – a process called multiple deposit creation.” Also: p. 428: “Therefore, the total increase in deposits from the initial $100 increase in reserves will be $1000: The increase is tenfold, the reciprocal of the 0.10 reserve requirement.
I stated: “This 571% increase in government debt held by the central bank means that new checking accounts were created at a multiple of more than 10 times this growth rate.” And: “The end result is the creation of 10 times the amount of the original new money that was created by the central bank”.

I did not mention that deposits had been created in a direct ratio of the RR, but that they had been created as a multiple of the amount of money the central bank created.

Re: No mention of monetary base/not mentioning other facts which are outside of the central banks’ power:

My purpose here is not to explain every detail of the money creation process, as would be the case in a text book. Regardless of what direct control central banks have of ultimate money supply creation from the increase in the monetary base which they bring about, the point is still the same: money creation and inflation can only come from the central bank.

Re: Banks are intermediaries that connect savings with borrowers and allow us to receive interest:

An intermediary takes money from one party who is willingly handing it over for the purpose of loaning it to someone else. They give up the access to that money for the specified period of time. This would occur in the case of a time deposit, for example. When a bank tells you your money is available while at the same time telling someone else it’s available to them, that’s not being an intermediary. When a bank creates new money they are making money at our expense (via inflation). They are not being paid to act as an intermediary in that case; they are paying themselves at our expense.

What do you mean by interest? Do you mean loaning $100 and getting paid back $105? The primary reason interest in this form exists is because of inflation.

Actual monetary interest exists in our world primarily due to inflation – Revenues rise ahead of costs due to new money being printed, while costs were paid out in the past when things cost less. In a world with a constant supply of money, profit/interest can exist only in the form of net investment – depreciated costs (and cost of goods sold) lagging behind due to the fact that they are spread over a longer time period. This is the only way one can explain how firms, economy-wide, can take in more than they lay out for capital investment and labor (see George Reisman’s Net Investment/Net Consumption explanation in his book Capitalism).

Thanks though for your input!

McCain has also stolen RP’s ideas about medical tax credits which he is currently promoting and gaining favorable press for them. He is clearly angling for RP supporters’ votes. Of course there is no chance that McCain would actually do any such thing so it is just the usual smoke and mirrors.

The fact that a self-ordering society is possible does not even enter the minds of politicians - and most ordinary people too since they garner their ideas of the workings of a society mostly from the speeches and writings of current and former politicians. One need only look around at those running for various government offices - especially that of president - and pay attention to how each tries to out do hir opponent in promising to enact and enforce some legislation that will interfere with the voluntary interactions of some individuals. Even if you are not effected by current promised regulations - and this is likely impossible - there will very soon come a time (if it hasn’t already) when you will be unable to obtain or provide some product or service that you and others want. (Maybe just afford 1/2 a tank of gas??) Order in society does not require government. Individual self-order without rule by others is the social system whose members are humans, who have become fully adult. Just as people can become physical adults, so can they become social adults - if only they are allowed (and even required in the sense that they will not achieve their desires unless they do) to socially mature sufficiently.

Understanding the social interaction methodology by which more individuals would progress to become fully socially mature adults requires a paradigm shift in thinking about human interactions. I invite - and even challenge - those who seek a society of individuals interacting to mutual benefit (or are maybe only curious at this point) to read “Social Meta-Needs: A New Basis for Optimal Human Interaction” and then review the twin frameworks of the Natural Social Contract and Social Preferencing, both of which flow from that basis.

BTW, this was the only second article I’ve read by Kel Kelly, the first one at mises.org today regarding food “shortages”, and am pleased to find another source of economic sense to which to direct others.

**Kitty Antonik Wakfer

MoreLife for the rational - http://morelife.org
Reality based tools for more life in quantity and quality
Self-Sovereign Individual Project - http://selfsip.org
Self-sovereignty, rational pursuit of optimal lifetime happiness,
individual responsibility, social preferencing & social contracting

When you physically hand over several $20 bills to the guy at the gas station, you really see first hand how punitive these sales and excise taxes are. If people get a taste of tax reduction - even though its mainly symbolic in this case - it could lead to an uproar when the moratorium ends and could even lead to outrage over other “real” taxation.

Dick Morris wrote that the price of gas was Bill Clinton’s numero uno concern. He fretted over it constantly because there is a direct relation between the price of gas at the pump and the president’s approval rating.

I know cutting the tax isn’t solving the other problems, but we have to stop lumping everything together. We’ll tackle drilling and refining next week. So I say, let’s go for it! Let’s put up a stink now over the tax and then put up a stink over the issue come Labor Day weekend when they start talking about “repealing” the tax break.

One factor being blamed for the price hikes is the use of government subsidies to promote the use of corn for ethanol production. An estimated 30% of America’s corn crop now goes to fuel, not food.

“I don’t think anybody knows precisely how much ethanol contributes to the run-up in food prices, but the contribution is clearly substantial,” a professor of applied economics and law at the University of Minnesota, C. Ford Runge, said. A study by a Washington think tank, the International Food Policy Research Institute, indicated that between a quarter and a third of the recent hike in commodities prices is attributable to biofuels.

Last year, Mr. Runge and a colleague, Benjamin Senauer, wrote an article in Foreign Affairs, “How Biofuels Could Starve the Poor.”

“We were criticized for being alarmist at the time,” Mr. Runge said. “I think our views, looking back a year, were probably too conservative.”

…

“It takes around 400 pounds of corn to make 25 gallons of ethanol,” Mr. Senauer, also an applied economics professor at Minnesota, said. “It’s not going to be a very good diet but that’s roughly enough to keep an adult person alive for a year.”

Also, I read something interesting yesterday as well:

Three million people died in the Bengal famine of 1943, though the rice crop was good. Nobel Prize-winning economist Amartya Sen attributed the mass starvation to rumors of a rice shortage, which caused panic, hoarding and price inflation.