NOIS²E

Chapter VII Presidential speech to the American People (What should be said)
I have come to you today because I want to address our great energy challenge with a new breath of honesty that you see as not only important, but as a line in the sand as we step towards our future. . Since the 1960s and over the last fifty years, there are several times when the Executive Branch has not been forthright as it should. Case in point, Vietnam and Iraq both started on premises that were highly suspect: the Gulf of Tonkin in Vietnam; and Weapons of Mass Destruction (W.M.D.’s) in Iraq. The USA wanted a fight. We were not clear when we supported Saddam Hussein versus Iran in the nineteen eighties, and Bin Laden against the Russians in Afghanistan. We sacrificed our soldiers, our future, and our principles time and again. Is this just WW II hangover, a seemingly brashness that ignored the on the ground realities?
We pursued a “Guns and Butter” campaign in the 1960’s and early 1970’s which ultimately gave rise to inflation and interest rates up to 20 %. Since 9/11/2001, we allowed deficit spending and “loose money” policies to pay for Iraq and more, and that led to the economic mess we are now in. If you recall, WW II, a credible war, was supported not only by our troops and money, but our citizens experienced rationing of food, domestic goods, and for a time, no commercial cars were built, and more. Citizens supported the war. Today, we still have the spirit, but not the committed objective.
We have new challenges which have not been clearly explained for you, and I am going to change that. You know I have been traveling around the world talking about Energy, and why it is time for a change.
You know we have been struggling with oil since the nineteen seventies, but since 9/11/2001, the last ten years, petroleum prices have tripled, from about $1.11 for a gallon of gasoline to $3.60 – 4.50 per gallon, while our consumption, largely due to our economy, has gone down. Our excuse is that it was largely because of the energy growth of China and India. But the profits soared in the American and world Oil & Gas companies. Since the seventies, when we could no longer use only domestic production to meet our needs, till now, we have evolved to over 45-50 % of our needs being met through oil imports from Mexico, Canada, the Middle East, South America, Nigeria, and more. Our prices have increased largely due to uncertainty in the Middle East. Meanwhile reserves have grown, even though USA production rates for oil have been flat, until recently. Last year, for the first time, Saudi Arabia sent over one million gallons of oil per day to China and less than a million gallons per day to the USA. Remember most petroleum in the world is settled in American dollars. We have to be more productive! We have to protect the dollar as a reserve currency. Yet inflation is raising its head, through food prices. Treasury financial “kick the can down the block” called (Quantitative Easing ) (QE), funding bonds and pushing them down the financial highway is suppressing the rest. If this doesn’t define a bubble, I don’t know what does: 1. Energy Bubble. 2. Bond bubble.
This is a subject that bewilders most Americans. In the months ahead you will learn a lot about this, for the wrong reasons. Much of world trade occurs in dollars, because the currency is not volatile, including about 76 % , although declining, of oil trade. You know we have about $16 trillion in national debt going to 17 trillion due to operating with an unbalanced budget. This is called deficit spending. WE sell treasury bills (T-bills) to the world at a current rate starting at 1.5 percent interest. Don’t you all wish that was your credit card rate! Nations buy it because they need dollars to support their trade. If we cannot sell T-bills, we have to raise rates until we balance our debt with these “loans”. So a strong dollar supports lower T-bill rates. Another factor is that the US military supports the trade world, it seemingly “secures” our stability.
Well, this is under attack and the implications of the dollar not being the world’s reserve currency is potential of massive inflation, some predict, beyond 1980’s (20%). I have said enough on that for the moment.
You and I know that a lot of the drag on the American economy is led by the cost of energy, and particularly, oil and petroleum. It has almost destroyed the airline industry, and has hindered transportation, and in particular, trucking throughout the world. Energy presses on the cost of manufacturing and retail delivery, and is the biggest single factors behind our depressed economy, and in fact, the world economy. As I mentioned, we also see record profits in the Oil & Gas companies.
We are threatened by climate change, and there has been significant drought in middle of the USA impacting agriculture, and in particular corn (remember Ogallala Reserve.) Much of the dismay in Libya, Egypt, and the Arab Spring was that although oil prices were high, with profits to their governments or kings, the cost of food for the everyday person was skyrocketing. Corn is the staple diet for hogs and cattle including dairy cows, and more. Livestock consumes 47% of the soy and 60% of the corn produced in the U.S. Some governments supplement food costs, but that did not solve the problem, they just trade oil profits for keeping the peace at home. And it did not work. Agriculture’s problem is water. With seven billion people, food and water must be stable commodities. Imagine with nine or ten billion people. How are going there! The USA population went from 183 million in 1962 to 313 million in 2012. We expect to be at 450 million by 2050. Forty two percent of food imports to North Africa come from the USA.
We have to change and I am sure you are dismayed at our seemingly unacceptable choices. In spite of what you have seen and heard of as stimulus, economic progress in the USA is still marginal at best. One thing that should have been clarified by all of us, in government, is that 2/3 of stimulus was really stopping of the economic decline. After all, supporting police, fire, teachers, and more does not stimulate anything except the status quo and preventing a depression. But I believe the American people were led to believe that we were investing in growth, not anti-decline. For that I apologize, not for doing it, for communicating poorly. Government is too frequently afraid to be honest and it always comes back to haunt us.
So we spent over a trillion dollars on war in the Middle East. We let our banks, frankly, invest in poorly underwritten loans, which shook our financial stability, and we absorbed tripling the cost of our transportation energy and more, even though as I said, the USA’s consumption of fossil fuels declined in the last ten years(until recently). Think about it: China is buying some of our debt in T-bills while their growth persists and that is why our transportation energy expenses have tripled.
That is insane. Countries are buying our debt in T-bills, so we can secure their energy at triple the price. That’s insane for them.We need energy independence. Not the words, the reality. We are spending many billions of dollars extra per year so we could pay foreigners interest on our debt? And how many trillions have we spent securing the delivery of oil around the world. This is upside down.
This is why the paradigm of: demand exceeds supply, has to be reversed and we need the support of the American people to change it. When energy supply is properly increased, prices will fall, it is as simple as that. We can do this fairly quickly. This is why I am speaking to you today, so you can understand the dynamics of change, and what we are, together, going to do about it.
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