Time to Crack Down On Gold Miners?

Harry Reid uttered one of the more brain-dead non sequiturs of recent memory a few days ago:

We have to do something about these soaring gas prices. We need to take away the subsidies of these five major oil companies.

In fact, of course, the oil companies are huge taxpayers, and the “subsidies” are ordinary deductions that slightly reduce the oil companies’ immense tax liabilities. They are not actual government subsidies, like the ones that go to the Democrats’ corporate cronies in the “green” energy business, which exists only by virtue of government largesse.
The Institute for Energy Research decided to have some fun with Reid’s pronouncement, taking off from the fact that most of the gold produced in the United States comes from Reid’s home state of Nevada:

With gold prices reaching record heights in April, gold mining companies are reporting huge profits. 79 percent of all gold mined in the U.S. comes from Nevada, where the state’s senior senator, Harry Reid, is a stalwart defender of the industry. But with the soaring price of gold, the U.S. government still allows the gold mining industry to take advantage of deductions in the tax code. These subsidies must end.
Today, Thomas Pyle, president of the Institute for Energy Research, issued the following statement:
“… Washington must also do something about soaring gold prices. With gold prices at new heights, mining companies must be punished for making record profits. Senator Reid must apply his flawless logic to the gold industry: he must strip the gold mining industry of their ability to deduct expenses from their taxable income. Then, as he says will happen with gas prices, gold prices will necessarily fall.
“OK, we’re just kidding. But this example illuminates the absurdity of the argument put forth by Senator Reid and his allies. …
“Senator Reid is talking nonsense when it comes to gas prices. Whether he realizes it or not, his attempt to pass a discriminatory tax policy that singles out the oil and gas industry will do nothing to lower gasoline prices. Instead, he should focus on the Obama Administration’s anti-energy policies that have played a direct role in the skyrocketing price of gas.”

A broader point needs to be made. The prices of commodities generally have risen sharply over the past year. Which is another way of saying that the value of the dollar has fallen. This chart, showing commodity price increases over the past twelve months, indicates that oil prices have risen by about an average amount; i.e., the price increases have mostly corresponded to devaluation of the dollar. Among other things, this shows the stupidity of thinking that the rise in oil prices is due to “speculators” or “market manipulation.” Click to enlarge:
How about those cotton prices? Time to raise taxes on Jockey and Fruit of the Loom! That’ll show ’em!
So what is really happening is not that oil, or gold, or cotton has suddenly gotten more valuable. Rather, the dollar has gotten less valuable. Why? Because of the Fed’s quantitative easing plan, which has the full support of the Obama administration. It doesn’t take a genius to figure out that cheapening the dollar makes everything more expensive. Maybe someone could explain this to Harry Reid.


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