Tuesday, December 15, 2009

Put "Cap" and "Trade" together...you get "Crap"

Imagine for a moment that you are a farmer, and on your nice plot of land you grow potatoes. Every year you grow 10,000 pounds of potatoes, sell them on the open market and make enough of a profit to keep you in business another year.

Across the road from you is another potato farmer, on a similar piece of land, but he's kind of a lazy guy. He scatters a few seeds around, doesn't fertilize, lets the weeds grow, and each year his crop fails.

Then one year the government comes along and announces that they believe there are too many potatoes on the market, and they find it necessary to "cap" the number of potatoes being produced. They will give each farmer a permit to produce 5,000 pounds of potatoes, but if the farmer wants, he can sell his permit to another grower.

So the lazy neighbor comes over one day and offers to sell you his permit for a few thousand dollars. Since you need to continue producing 10,000 pounds of potatoes to stay profitable, you buy the permit. Of course, you now have to recover the cost of buying the permit, so you raise the price of potatoes to cover that cost.

Net result: There is no increase in the number of potatoes being produced, the cost of potatoes to consumers has risen and a chunk of your wealth is now in the hands of the non-producing neighbor. The only person who wins in this scenario is the non-producing neighbor, who now gets something for nothing.

Now, replace "you" with "Developed countries," replace "neighbor" with "underdeveloped countries," and replace "potatoes" with "energy," and you will understand what the underdeveloped countries of the world are trying to accomplish at the "climate summit" in Copenhagen.

Third-world countries - mostly African dictatorships - are using the make-believe threat of "global warming" to try and guilt the developed countries into agreeing to a cap-and-trade scheme that will give each country permissible amount of carbon emissions (the "cap"), which would then force developed countries to buy the permits from poorer countries (the "trade") in order for the larger countries to maintain their energy output and continue to grow their economies.

Of course the underdeveloped countries remain underdeveloped, in large part, because they are reluctant to embrace concepts like democracy and free enterprise, which would put them on the path to growth, prosperity and peace. It's more fun to run a dictatorship, oppress the people and then come up with ways to get bigger, more successful countries to transfer some of their wealth to you.

This same "cap and trade" concept is behind the bill passed earlier this year in the U.S. House of Representatives, except it applies to businesses in the United States. The government would auction off carbon emission permits, which could then be traded among various industries. So if you are Xcel Energy, for example, you might have to buy a permit from another company in order to continue to produce energy for your customers. Of course, the only way to recoup the permit cost is to raise rates on your customers. There won't be any fewer carbon emissions, you'll just end up with a higher utility bill each month.

Fortunately the proposal is so stupid, the Senate hasn't even considered it. But when you hear "cap and trade," it's time to guard your wallet, because the only thing these schemes are designed to do is separate you from your money.


  1. Excellent Allegory. I hope people shut these fools down before they break the bank. Remember the Margaret Thatcher quote: "The problem with socialism is that eventually you run out of other people's money [to spend]."
    I will re-post this.

  2. You hit another home-run here, Tim! Keep it up! Hopefully, people will finally start to listen, hear, and get it!!!

    TFMH :)