Gas-Gouging Greenspan

[Trey Brister]

Gas-Gouging Greenspan
Posted: September 2, 2005
1:00 a.m. Eastern

Many voices are crying about high gasoline prices and price gouging by oil companies, but I think that most people remain wholly unaware of the hidden and, by far, largest amount of price gouging going on right under their noses.

Recently, Alan Greenspan, chairman of the Federal Reserve Board, spoke at a Fed-sponsored confab in Wyoming. As he will retire soon, it was the last time he would address this group as Fed chairman. I'm sure the attendees paid the requisite obeisance to – in Bob Woodward's fawning words – "the Maestro."

My curiosity piqued, I decided to do some research and find out just what it was that the Maestro's tenure at the Fed had wrought. Alan Greenspan became Fed chairman in 1987, so I thought that was a good place to start. Using the inflation calculator for the CPI at the Bureau of Labor Statistics, one finds that what $1.00 bought in 1987 now takes $1.72 in 2005. In other words, through the mechanism of inflation, Greenspan so debased our currency that dollar holders suffered a 72 percent loss of purchasing power during his term as Fed chairman, a mere 18 years.

To demonstrate further the perniciousness of Fed policy, I decided to go back to the inception of the Federal Reserve System in 1913. Again using the BLS inflation calculator, I made a comparison between 1913 and 2005. In 2005, it takes $20.00 (rounded from $19.74) to equate to the purchasing power of $1.00 in 1913. In other words, since the Fed's inception, the price level has increased 20 times! Put another way, a dollar today would only buy you a nickel in 1913. That is, since 1913, Fed policy has eroded the value of a dollar's purchasing power by 95 percent.

In my area, a gallon of gas is going for $3.00. According to Microsoft Investor, Exxon-Mobil's profit margin is 10 percent. This means that for every dollar of revenue, 10 cents in net income flows to the bottom line. With retail gas at $3.00, Exxon-Mobil makes 30 cents per gallon. Here in Pennsylvania, federal and state taxes on gasoline come to approximately 45 cents per gallon. But, what about Gas-Gouging Greenspan? To see his tax, we will have to do some math.

Gas costs $3.00 per gallon. Subtract 45 cents in government taxes, and we're left with an ex-taxes, nominal 2005 price of $2.55. Now we must take into consideration Gas-Gouging Greenspan's effect. To do so, we'll divide the ex-taxes, nominal 2005 price of $2.55 by the 2005 price index of 1.72 ($2.55/1.72 = $1.48). So, of the ex-taxes, nominal 2005 price of $2.55, without Gas-Gouging Greenspan's inflationary impact, we'd be paying only $1.48 for a gallon of gasoline. The difference of $1.07 ($2.55 - $1.48 = $1.07) is Gas-Gouging Greenspan's inflation tax.

So, here's the breakdown:

* Gas-Gouging Greenspan's inflationary take = $1.07

* Government's take = 45 cents

* Exxon-Mobil's take (net profit) = 30 cents

In light of these numbers, I ask, who's doing the gouging?

Keep in mind that Exxon-Mobil employs 105,000 people worldwide and must explore for, produce, transport, refine and market its product. Government has to do none of these things – its take is assured no matter whether oil prices rise or fall. But, at least, government performs some useful jobs, defense being foremost among them.

Because his job is wholly unconstitutional, the Fed chairman has no constitutional responsibilities. He also has no excuse for being the counterfeiting, inflation-mongering, Gas-Gouging Greenspan that he undoubtedly is.

Robert J. Frasconi