BONEHEADED MISCALCULATIONS ...

I don't always agree with some of the information and observations I get from the financial news or newsletters I receive regularly, but this one from The Daily Reckoning offers some very sobering observations. Here's a snippet ...

The most boneheaded miscalculation of all time...

“Terrorism will be reduced...weapons of mass murder will be limited, people will be safer around the world, human rights and democracy will be unleashed in the Middle East, and the fragile outlook for world prosperity will be improved... The uncertainty tax on world growth will be lowered too, as will the energy tax from temporarily spiking oil prices.”

This was Larry Kudlow writing in March, 2003.

The spike in oil prices he described took place on March 12th, 2003, pushing the price of a barrel of crude all the way up to $37.83 and the price of a gallon of gasoline to $1.72. Yesterday, oil closed at $137 and gas sells for $4.06.

But Kudlow was hardly alone in his hallucinations. Laurence Lindsey, then George Bush’s senior economic advisor, looked into his own crystal ball and saw nothing he didn’t like.

“Under every plausible scenario, the negative effect will be quite small relative to the economic benefits... The key issue is oil, and a regime change in Iraq would facilitate an increase in world oil,” thereby driving down oil prices.  

Paul Wolfowitz, then Deputy Secretary of Defense, went on to reassure the nation that Iraqi oil revenues would pay all the costs of reconstructing the country.

Today, we are talking about one of the most boneheaded miscalculations of all time. Almost with a single maladroit stroke, a relatively small group of world-improvers undermined the progress of 9 generations. Five years later, Americans are on the losing end of the “biggest transfer of wealth in history,” as T. Boone Pickens described the oil market of 2008. George W. Bush has the highest disapproval ratings of any U.S. president in history. America’s most profitable industry – finance – has collapsed...its currency has lost a third of its value...and European, Chinese and Indian economists are wagging their fingers saying, “I told you so.”

But here at The Daily Reckoning we always look on the bright side. And the sunny side of this story is that the United States needed to be humbled. After the Soviet Union fell to its knees in 1990, America had a monopoly on worldwide military force. Nature abhors a monopoly; she needed to take the U.S. down a peg. Who better to do the job than this group of neo-cons? They knew no history; nor did they understand economics. They were the perfect people to lead the nation to disgrace and bankruptcy.

Mr. Kudlow continued his miscalculation by referring to a survey, in which 69% of respondents said they would gladly pay $300 for the war.

So far this year alone, the price of crude has risen 40%. It’s now $100 higher than when the neo-cons took America into the Iraq War. Each American uses 25 barrels of oil per year. This is equivalent to a tax of $2,500 in additional energy expense per person...or $10,000 for a family of four, annually. In addition, the war itself is estimated to cost between $1 trillion and $2 trillion. Divide that by the number of U.S. families and you get a figure of $10,000 or more.

Ooops ...

And on and on it goes. Long story short, even the financial analysts have had it with the Bush administration. And why not? As the articles points out:

When Larry Kudlow, Laurence Lindsey and Paul Wolfowitz were explaining how nice it would be to rough up the Middle East, the average suburban American household spent $1,422 on gasoline. Now, according to the Bureau of Labor Statistics, the sum has risen to $3,196.

Read the entire article if you can (it may have a subscription wall). It explains, without trying, why John "I'm-Bush's-Third-Term" McCain should not president.

- Mark