Is Donald Trump an Idiot?

On CNN this morning, Donald Trump was asked about his support of John McCain and for his opinion about the bailout. Like any good politician, he answered the question he wished he was asked and not the one he was asked.

To paraphrase: "Well yeah I support John McCain because of his experience and because he knows how to deal with OPEC. You have to control the price of oil. Listen, If I owned a store, and you owned a store and we fixed prices, we would be thrown in jail. That is exactly what the OPEC countries are doing. I like John McCain because he will go to those OPEC countries and address this and tell them they've got to stop hurting our economy."

But the true slice of brilliance came next:
The 'Trumpster' added: You see it with the failure of the bail-out. The bailout failed and the price of oil dropped by $10 a barrel, the highest ever drop in the recording of oil. Look, I think the price of oil is more important to our economy than interest rates."

How the hell did this man ever make one red cent?

The price of oil drops when speculators and buyers believe that there will be a drop in demand for oil. If anything, OPEC regulates the supply of oil not the price. Numerous countries have held revues of the system, world economists, resource experts and all pretty much agree with the way the system is run. The issue with oil is that it is an incredibly inelastic market so that any increase in supply results in short term price decreases that spur demand that ultimately result in price increases.

So yesterday, as wise as it may have been not to give Secretary Hank Paulson a blank check for trickle-down economic intervention, the markets reacted poorly and speculators held the belief (I would imagine) that the economy was in for a rougher than smooth ride with more job loss and a general slowing of economic activity. In other words, they believed as credit freezes up, foreclosures and bankruptcies continue, notwithstanding that Congress may still act to do something to prop up the flailing US economy there would be less demand for oil and gas in the coming weeks and hence lower prices.

We witness this every summer in Ontario as prices decrease Monday morning as a portion of those people in the workforce go back to work (think of how nice traffic is in July and August) and rise again for the weekend as people make plans and drive more. Then there is a refining stage between crude oil and gas at the pump which adds its own supply and demand issues.

What baffles me about Trump's comments are that he deals in real estate, a different market that involves speculation, regulation and responds to supply and demand. If a housing market is flooded with very nice, high quality, cheap apartments, it doesn't make sense to build a Trump Tower for instance. Similarly, if there are few apartments, the price of those on the market goes up - as anyone who moved to Toronto in the mid-to-late 90's can attest. With respect to land values, speculators do what they do best and buy properties that they believe will be critical pieces of a larger assembly or assemble properties believing zoning changes are achievable. If major transportation projects are announced, speculation runs rampant. There are short games and long games, micro and macro effects and forces at play in both oil and gas and the housing market. So Trump must enjoy a better understanding than his comments demonstrate.

Perhaps this is an Apprentice-styled rouse?

Perhaps Trump is smarter, way smarter than I am giving him credit for. Trump relies heavily on the price of carbon-based fuels to build his buildings - everything from steel, concrete (very CO2 intensive,) glass and simply moving dirt around, costs more as the price of gas goes up. So, if there is doubt in the economy, created in part by the total lack of understanding in the economy of a President McCain, that would mean that the price of oil would be fairly low for sometime into the foreseeable future. But there's a flaw in his thinking if that's the case since less people would be able to afford his luxury condominiums if the economy remains ill. So that would not be very wise ultimately since he benefits far more from a strong economy than from cheap gas and instability.

Perhaps Trump truly believes that McCain does have the ability to impact OPEC policies while every single other world leader also dependent on cheap gas to fuel economic growth has been unsuccessful. Those leaders undoubtedly employed more diplomacy than McCain is capable of, enjoyed a greater esteem for their nation and was seen as less greedy - things the US are not very well known for as they enter the post-Bush era. So how will John McCain be able to do anything about oil prices (especially when in reality, there is a fixed supply, whether we burn it quickly or slowly is another issue?)

He could invade those nations that are members of OPEC and remember that he will not tell his plans because you 'don't tell sovereign nations what you're thinking.' That would ultimately cause higher gas prices - nothing costs more to fuel than a War! Would McCain create greater stability in the mid-East region? That is highly doubtful given that he supports maintaining an occupying force in Iraq and is talking tough about Iran.

Oil and gas markets want stability - as most markets do. McCain does not possess the skills to stabilize the economy and his approach to foreign affairs would not necessarily create greater stability than Obama - not enough to look past his lack of economic knowledge. Forget Palin. She's a nightmare.

McCain would give a gas tax holiday - at least if he keeps his word, when gas prices are at their highest, which would of course, drive prices higher while also removing the source of the Highway Trust Fund. So he's not an Eisenhower by any stretch of the imagination as some are suggesting he is with his Nuclear Plant program. Though one could argue that McCain's nuclear plan is similar to Eisenhower's Interstate program in that it would create an infrastructure that is ultimately financially unsustainable!

Anyway you look at it, there is simply no way in which a McCain government would be able to do anything about the price of gas and inevitably, his efforts to fix the problem would only make them worse. The flip side of the question here is whether the absence of OPEC would decrease the price of oil or whether competition would have a deleterious effect on the oil market? OPEC mandates and regulates how much each nation is contributing to the global pool of oil. This ensures that in times of crisis in one OPEC nation, others can ensure that global supply is maintained.

Lastly, if the Americans possessed the world's majority share of oil and had the ability to set prices, do I even have to ask the question that logically follows? Would they subsidize the rest of the world by selling their natural resources at below-market rates? And would they sell that resource off prior to it achieving its highest possible market value? Oil is not currently worth what it ultimately will be as supplies continue to dwindle and if our consumption continues at its current levels or worse increases. So wouldn't it make sense for nations to keep the lid on their supplies for as long as possible to achieve the highest market value - the last barrel is worth significantly more than the first - notwithstanding the expense of getting to that last barrel.

What is up with Trump? Is he being serious or has too much carbon-based hair product finally leaking through to his brain! Oh, right. He's American which means the sun rises over his bed every morning and it will and should forevermore!