How Saudia Arabia Combats ISIS by Low Oil Prices

Here in America recently, we've really enjoyed that oil prices have been decreased as of late. It feels absolutely wonderful to go to the pump and not feel your wallet decrease in weight (just out of curiosity, why is this still an expression? We all just use plastic cards and place them back in our wallet when done.). 

But there is a much more significant reason why low oil prices right now are a beautiful thing. A reason that has greater geopolitical significance, as well as the potential for much greater benefit for people around the world, then anything economic. 

ISIS is now having difficulty making a profit on their smuggled oil sold through the black market. 

Ever since the United States officially got involved in the ISIS controversy, they knew that one of the best ways to destroy the organization was to cut off their profit from their oil smuggling. The United States had then urged Turkey to strengthen border control to prevent ISIS access to Turkey's black market. 

But regardless of access to black markets, if oil prices as a whole goes down, it becomes hard for ISIS to actually make meaningful profit on the black market to begin with. This means that our currently low oil prices is good because it might just slow the atrocities of ISIS. 

But what has caused these low oil prices to begin with, Believe it or not, evidence indicates that this is Saudi Arabia's attempt at squashing ISIS right now. 

Saudi Arabia is the world's largest exporter of oil controlling 18% of the world's petroleum reserves. This gives them immense power over the oil prices. If they speed up production, prices go down. If they slow down production, prices naturally inflate. This of course is all due to the law of Supply and Demand. 

Right now, Saudi Arabia is pumping oil quickly and that is a large contributor to the lower oil prices. They themselves are losing revenue through this. But they believe that ISIS poses a threat to their security, so they are willing to cut off their nose to spite their face. 

Saudi Arabia is in this for the long haul too. They believe that they can withstand these lower oil prices for 8 years. 

Would it be incredibly cheesy to end this post with "God bless Saudi Arabia?" 

Too bad. God bless Saudi Arabia. 

It's All About the Money, Boys!

Money! It is something that many people will seek in the world. Some may cheat for it, some may steal it, but whatever it is, it is something that most people in this country so desperately seek.

But why is this such a fervent desire anyway? It's not as if the money we get in this world today is actually worth anything at all!

Yes, you knew I was going there, didn't you? Here I am, telling you your money is just worthless paper. Now of course we agree to trade it still. But that is only because the government says it's valuable.

Yet even the government is not able to keep our "dollars" at a steady rate. Due to laws of economics, the money we use is bound to become far less valuable over time.

It wasn't always this way. When our dollar system started, it started out as a gold certificate. You see, a dollar is a measure of weight. You could return a paper dollar into the US treasury and receive a dollar of gold.

Then in the Great Depression, the American people were robbed. The paper currency was no longer backed by the Gold Standard. Since that time, the American people have been trading green Federal Reserve Notes that for some reason still go by the name, Dollar in common nomenclature.

Here's the benefit with Federal Reserve Notes. They are not standardized by a set amount of gold and thus can be inflated at the government's will.

The main disadvantage with Federal Reserve Notes is that they are not standardized by a set amount of gold and thus can be inflated at the government's will.

That's when the laws of supply and demand kick in. As the supply of dollars in our economy goes up, the value ultimately goes down.

Think of the most expensive things in the world: Diamonds, signed Home Run Balls (especially when breaking a record), chocolate. Oh wait no, that last one isn't expensive, it's just in the same league as the others qualitatively.

But then that illustrates my point exactly. Despite the fact that chocolate is as good as diamonds, why is it that diamonds are so much more expensive? Well, if you go into any store, you will find chocolate. But you won't always find diamonds. Diamonds are much more rare. Even with the recent chocolate shortage, there is still a higher supply of chocolate than there is of diamonds.

As the dictates of supply and demand tell us, with rarity comes a higher value. When supply is increased, demand for that commodity is decreased, and the product now has a lower value.

And that is what has happened with the US Dollar as it shifted from a gold certificate to the Federal Reserve Note we see today. As the Federal Reserve inflates the dollar by pumping more Reserve Notes into the economy, it requires more greenbacks to buy milk, eggs, and bacon. Thus, inflation causes rising prices.

But then that shouldn't be that big of a deal, right? After all, since there's more money in the economy, we should all have more money to spend on milk, eggs, and bacon, right?

Except the harsh reality is that when the Federal Reserve pumps more into the economy, it never is distributed perfectly among all citizens in the nation, leaving some with limited buying power, and others with a surplus.

That is why it is so silly for us to have money that is truly worth nothing at all. I didn't even mention the Boom-Bust Cycle or the exchange rates between currencies in other nations. But even with this surface-level examination, we see ample reason why inflation is destructive.

Why the NFL Needs a Lesson in Economics

The past few days, we have been met with a slew of four NFL playoff games. The playoffs are always an exciting time of year for football fans (should their team qualify, that is). Yet this year, 3 teams, Cincinnati, Indianapolis, and Green Bay struggled to sell out their stadiums for this special occasion.

So why is this the case? It should be noted that Green Bay has sold out 319 consecutive games. So at least for Green Bay, this isn't a lack of commitment from their fans.

Of course, the fans are still being blamed for the lackluster sales, but this is ridiculous. The NFL is a business, like any other. Every other business is required to produce a great product at a reasonable price, and should they not, they will be unable to sell their products. If a business fails to sell their products, we assume that their services aren't worth the price, not that the customer isn't loyal enough. As Bob Kravitz of the Indianapolis Star explains,

"Sports have got to be the only business where the consumer gets blamed for poor sales. Any other business, we'd look at the numbers and say, "Well, their price point is too high,'' or "The service stinks,'' or "They don't carry a good selection of inventory." And it's ridiculous. NFL fans are the most loyal fans we have in this country. If they're not purchasing playoff tickets, that tells me it's an NFL problem, not an Indy/Cincy/Green Bay problem."

This was the consensus as well from the fans down here in Cincinnati, some of whom said that if tickets were just ten dollars cheaper, they would have purchased them liberally. So you may ask why didn't the teams lower the prices of their tickets? They can't as the NFL sets playoff ticket prices "based on each market's ability to pay" and will not let teams discount the tickets. Of course, the NFL is not in these cities and does not know what prices fans of these cities are able to afford. Their estimates are unfortunately over the mark in these three cities.

The NFL should use to learn some economics from this week's poor sales of playoff tickets, and lower their prices to where they can be afforded and are worth the cost. Better yet, perhaps the NFL should let the individual teams set the prices, as they better understand how much the market in their city is able to pay.