Regulation

2001-1-29 13:31:00

Good discussion. I'd like to see a few more of you jump in with your opinions, however. Don't worry about being right or wrong. We learn more by doing than we learn by being right.

The Question:

What is the real cause of the crisis in California?

I ask this to bring the principle of the Beast down to a level of practical understanding. The problem with pinpointing any current activities of emotional deception perpetrated by Beast energy is that controversy will always be involved.

This is not usually the case when we look on the past because the future often reveals the illusions of the past and when such illusions are revealed all of us in the present tend to look on the people of the past as being primitive -- not realizing that many of us would have been as duped as they were if we had been there. A thousand years ago many of us would have blindly accepted the decree of the Pope that the world was flat. This is an important point to remember when seeking the truth in the present.

We must be constantly asking ourselves concerning controversial issues if we are accepting information because of some authoritative decree or are we willing to look at real facts and evidence.

Okay, at the risk of offending some let us look at the facts in the power shortage situation in California.

We are told that the problem there is deregulation so we must first ask if there has even been deregulation and if so what was deregulated?

Almost all the news stories just tell us that deregulation has created an electrical shortage, implying that a total free marketing system has created a big problem.

What was deregulated was the wholesale prices that California had to pay for out of state power. The most important price which the consumer pays for use continues to be subject to strict regulation and price controls.

Let me give you an example of how this has worked.

Let us say that I am selling candy bars to consumers within the state of California. I buy them for 60 cents each and sell them for $1.00. I have a good demand, make a reasonable profit and everything seems to go well. I am happy to sell the candy bars and the consumers are happy to buy them and everyone is reasonably satisfied.

One day the government comes along and takes a look at my business and decides I am making too much profit. They think that 30 cents a candy bar is enough profit for anyone so they tell me that 90 cents is the retail price I must charge. I reluctantly go along for I have to make a living and this is my business.

After a while inflation hits and the wholesale price goes up from 60 cents to 70 cents. Because I must still sell at 90 cents my profit has now went from 40 cents per bar to 20 cents. I am now close to working for nothing because the 20 cents barely covers my expenses. I complain to the government that I am going broke. They, in their benevolence, decide to help me as well as others selling candy bars in the state. They issue a decree to all the candy bar wholesalers that they must sell to all the retailers at the old price of 60 cents.

The wholesalers reluctantly cooperate for a while for they need the volume, but as their prices begin to rise they find that they are working for nothing. Now whenever the demand for candy bars is high they shortchange the dealers in California and sell them to other states where they can make a profit.

The people in California get upset because they are experiencing candy bar shortages from time to time. What do they do?

The governor issues a decree which he calls "deregulation" and states that wholesalers can now charge whatever the market will bear in the state. In other words, the candy bar dealers are free to pay more than 60 cents a bar for their goods.

As a candy bar dealer I say whoopee? (Not!) Now I can pay 70-80 cents for candy bars and sell them for 90 cents. After I pay my overhead It will cost me $1.00 per bar to sell to you for 90 cents.

I complain to the government again attempting to get them to cease regulating the price I charge and get a curt response. They tell me not to be greedy for I will have lots of volume and will make as high as 20 cents per bar. They do not seem to understand that my expenses will cause me lose money on each bar and if I am losing money on each sale then the last thing I want is more sales.

Time passes and the wholesale price continues to increase, but I am stuck at selling for 90 cents per bar. I am accumulating much debt and behind on my payments to the wholesalers. My suppliers say that if I do not pay they will cease selling me the candy bars. I consider going out of business and calling it quits, but the government steps in and tells me they will not allow me to go out of business even though I am now paying 90 cents a bar and selling for 90 cents. I tell the governor that just ordering me to stay in business will not do the trick. If my wholesalers refuse to sell to me, because I cannot pay my bills, then I will have nothing to sell. If I can obtain no candy bars then I cannot be in business no matter who orders me otherwise.

The governor tells me he will take care of things and gets the President to order the wholesalers to continue to sell to me whether I am able to pay them or not.

Now we have the interesting situation where the wholesalers must sell to me whether they get paid or not and I must continue to sell to the public with continual loss. Both the candy bar retailers and wholesales are losing money under this system and are very unhappy. The consumers in other states are also very unhappy because their candy bar prices have jumped up to $1.50 per bar to subsidize the loss in revenue do to below market sales to dealers in California.

The suppliers of candy bars make little money over a period of time and do not upgrade their equipment or build new plants. Pretty soon there are shortages of candy bars everywhere and the finger is pointed at the greedy business people.

I hope this illustration helps us to understand the problem.

One important point not illustrated in the story is that California has not built a new power plant in over ten years because of strict environmental laws. They do not seem bothered that their consumption draws energy from power plants in neighboring states, so if one looks at the whole effect, not building power plants has had zero effect on reducing pollution. If California is going to double their demand for power they should be willing to build their own power plants rather than import from older plants with higher pollution than newer ones. I think there is some hypocrisy here.

How much intelligence does it take to see that if you double your energy consumption, yet build no new power plants then you are going to have a problem?

As I said the forces of the invisible Beast are always at work to create the illusion that freedom creates a problem and that more laws and regulations are needed.

Whenever you hear any news report warning of the dangers of freedom, start looking into the hidden facts and details and you will be amazed at the deception you will find.

Now, let us present another example.

We have been told that free trade with other nations is dangerous -- that it would create a great sucking sound of jobs disappearing from our country and heading south. Is this true? Why or why not?