Tom Friedman Gets It Right

I haven’t always agreed with Tom Friedman’s “The World is Flat” thesis, because it doesn’t really take into account local cultural resistance to the Multinational Corporate Project. But this morning’s Friedman column is spot on.

It baffles me that President Bush would rather go to Saudi Arabia twice in four months and beg the Saudi king for an oil price break than ask the American people to drive 55 miles an hour, buy more fuel-efficient cars or accept a carbon tax or gasoline tax that might actually help free us from what he called our “addiction to oil.”

The failure of Mr. Bush to fully mobilize the most powerful innovation engine in the world — the U.S. economy — to produce a scalable alternative to oil has helped to fuel the rise of a collection of petro-authoritarian states — from Russia to Venezuela to Iran — that are reshaping global politics in their own image.

Goldman Sach’s Arjun Murti prediction of $6 a gallon gas in the next year (chart above), will probably be reached, even though there will be some speculative blow off in the process.7% of world GDP goes to pay for energy and in the past that was the point that brought about a reduction in demand. It may be that the rapid growth of the BRIC’s (Brazil, Russia, India and China) will take that percentage higher than the historical norm, and the fact that their currencies are strengthening against the dollar makes the price shock less painful.

One other wild card to throw in the mix. China has been a huge exporter of capital (mostly in the form of buying U.S. Treasuries). It now has one of the largest post-natural disaster rebuilding efforts in history in front of it. Doesn’t this mean they will use their reserves for internal construction and thus might move into the position of being a net seller of U.S. Treasuries? Lower demand for Treasuries means higher U.S. interest rates. That could be a problem.

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0 Responses to Tom Friedman Gets It Right

  1. JR says:

    I remember the last energy crisis complete with lines to fill your car and actual shortages.

    Where are the lines and “shortages” now? All we have is higher and higher prices.

    Jon, I’ve changed my mind and now think your prior posts may be correct about the effect of speculators. And yes, I think it has contributed to our food inflation as well.

    Does it make sense to limit the ability to trade commodities to those who actually use or produce the commodity? Like Stephen Colbert channeling Bush, “my head tells me no but my gut tells me yes.”

  2. Jon Taplin says:

    JR-There is a bill in the house that would raise the margin requirement on Comodity futures trades. That would help.

  3. JR says:

    I was hoping it wasn’t part of the farm bill just vetoed by Bush.

  4. Jon Taplin says:

    It might be, but I think they have the votes to overide the veto

  5. Zhirem says:

    About Friedman: what was that saying about a broken clock being right twice a day?

    Sorry, but not giving this chowderhead any weight. His ridiculous pro-war, Friedman Units method of repeatedly assuring the public that all the Iraq situation needed was another 4 to 6 months. Of course he stated that repeatedly for more long the lines of 48 months, but hey, aren’t we a nation of the short attention span?

    Look over there! Shiny things…

    – Zhirem

  6. Another Jon says:


  7. Bryce says:

    “ask the American people to drive 55 miles an hour”

    Engine technology has advanced. I get over 30 MPG in my car going 70 MPH, which is better than when I go 65 MPH.

  8. Ken Ballweg says:

    The date on that Charlie Rose show is May 2003. Tommy has changed his mind since then.

    It’s sort of like playing a Bush clip where he says he will be the uniter. Context is everything.

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