Published 4/13/05
Alas, a recent forecast by Goldman Sachs projects the price of crude oil to double from current levels. Rest assured that the Optimist would not have been the first to tell you such disturbing and pessimistic news! Since that forecast has already been published around the world, however, the Optimist feels both entitled and obligated to offer an optimistic perspective.
A noted author and investment advisor penned an article which offered the prospect that $100 oil will be the solution to its own problem, both by reducing demand and by stimulating production of alternate sources of energy. Almost as if on cue, Alan Greenspan also announced that high oil prices would be temporary because the resulting decline in demand would force them back down.
You will be happy to hear that the above hopeful reassurance from others is not the positive perspective promised by the Optimist. Instead, the Optimist is pleased to report that when the price of crude oil doubles, and the cost of gasoline goes through the roof of your big and heavy gas guzzler, none of those price increases will have any effect on the Consumer Price Index. As yet more positive news, the Optimist can also forecast that even though the costs of our energy intensive food supply will increase sharply with the rising costs of energy, that too will not increase the CPI! Through the tandem application of exclusions and hedonic adjustments, the FED will protect us from the dreaded increase in inflation as measured by the CPI. You see, the FED cares so deeply for our concern about inflation that it directly excludes the volatile costs of energy and food from the CPI report, and that assures us that we will not see any bad effects on the CPI from the volatile (meaning prices which rise more than can be concealed) energy and food cost increases.
Even if by some chance, a small effect from a mere doubling in energy and food costs should spillover into the costs of rent, which is a major cornerstone of the CPI, then we can all sleep safely knowing that the FED has a full arsenal of hedonic adjustments in reserve to hammer the impact back down to almost nothing. Through the miracle of hedonic adjustments, the FED can clearly see that when energy and food double in price, that means they are worth twice as much, so there is no impact on the CPI because consumers get much more value for the higher costs they pay! The people who have limited incomes, and who complain loudly that they can no longer afford to buy both gasoline and food at the same time, should be grateful for the FED showing them that they are really getting double value for the double price they must pay, so there is no need to adjust their social security or tiny paychecks, because the reported CPI will not rise. The Optimist is overjoyed that he can present this positive viewpoint and thereby eliminate the need for people to otherwise worry that they might suffer from an increase in the CPI!
The other positive and optimistic perspective that the Optimist can present is that we should not be overly concerned that higher energy and food costs will act like a large tax increase and thereby slow the economy so much that rising unemployment might depress real estate prices. In an insightful analysis that you will hear only from the Optimist, you will now learn why you need not be concerned that rising energy and food costs might have a negative impact on real estate. Even though we can all agree that high energy prices will eventually moderate the high price problem by reducing demand and increasing supplies, only the Optimist will tell you that the high prices are solving the wrong problem. Consider that the USA is importing 10,000,000 barrels of oil per day a cost of $50 per barrel, so you and I are transferring half a billion dollars per day to foreigners. Much of that half billion dollars per day is recycled back into USA investments like purchasing property in the USA or buying bonds which hold down interest rates so greater fools can purchase property here. The great news, that you heard only here for the first time, is that when energy costs double, we will give foreigners a full billion dollars each day, so they can double their investments which support the real estate markets across the USA. Once this secret becomes known throughout government and the investment community, the Optimist expects that one of the new definitions of patriotism will be giving huge amounts of national wealth to foreigners so they can do good things for our nation!
The Optimist must admit that he was a little slow to see his patriotic duty to send gazillions of dollars to foreigners. Since the Optimist knows that you, as his close friend and supporter, can keep a long concealed secret, he can confess to you that in July 1979, the Optimist actually sent a telegram to the White House to beg the President to impose a high and increasing tax on energy. The Optimist argued uselessly that a high tax would increase conservation, reduce demand, spur development of alternative energy sources, lower the cost of imported crude oil, and thereby reduce the massive transfer of wealth from the USA to foreigners. The Optimist also argued, with equally little positive result, that the higher tax on energy wouldn't need to be a tax increase, since the income tax could be reduced to compensate. Believe it or not, gentle child of this new century, that was long, long ago in a galaxy far, far away where the USA had close to a balanced budget, and an increase in energy tax really could be used to reduce income taxes. Fortunately, the Optimist was not arrested for the almost treasonous thought that maybe we shouldn't give so much real national wealth to foreigners so they could help us like they have. Instead, the White House simply returned a short form letter, and wasted the 15 cents for postage to mail an acknowledgement of receipt. As a further confession that will help to clear my conscience, the Optimist must admit that he continues to harbor secret thoughts about 
higher taxes on energy and zero taxes on income and property.
Now that you alone know my deep and dark secret, the Optimist pleads with you to not forward this message to every newspaper editor in the nation who might be unpatriotic enough to print the possibility that maybe we should eventually consider reducing the rate at which we transfer national wealth to foreigners!
4/16/05 A reader writes:
If the prices of both food and gasoline continue to rise, this double whammy will solve one pervasive American problem: obesity. We'll have to walk more and eat less!
Comments by the Optimist:
Silence is golden, dear readers. The Optimist urges all to not let a word of the above comment reach the ears of anyone who might be foolish enough to relay it to the authorities. If the government realizes that by simply allowing fuel and food to become much more expensive they can help everyone to lose weight, get more exercise, have cleaner air to breath, and become much healthier, then there will be only one course of action they will pursue. The government will reduce the CPI as a special hedonic adjustment to account for the health benefits we will all receive as a direct result of the higher costs. The Optimist is confident that Congress would quickly rise to the challenge, and mandate that all salaries and social security payments with a cost of living adjustment factor should be reduced in line with the lower CPI reported by the government. If we fail to keep this secret and let it escape into the bureaucracy, the Optimist can confidently forecast that the rising costs of energy and food will quickly result in falling salaries, which in turn will give all of us less money to buy fuel and food, so that the additional hedonic health increases will cause wages to fall still more! For those alert readers who worry that this reverse snowball of diminishing wages could result in lower tax receipts so that the government would suffer, the Optimist can put your concerns at ease. You can be absolutely sure that the local, state, and federal governments will quickly rise to their patriotic duty and implement a hedonic health tax surcharge!