Holman Jenkins makes another good point in his WSJ column on energy (in addition to his conclusion, which I cited in an earlier post). He points out in response to Boone Pickens’s concern over the “transfer of wealth” to foreign oil producers:
[Pickens] says we spend $700 billion a year on foreign oil, which he calls a “transfer of wealth.” But exchanging money for oil at the market price is an exchange of things of equal value. If we didn’t value their oil more than our dollars, we wouldn’t participate in such a bargain.
It strikes me as so obvious as to be beyond mention, but for the frequently-expressed concerns such as made by Pickens. Even as wise a energy market commenter as Geoff Styles makes the mistake (in this post). Jenkins has it right: in a market transaction, wealth flows both ways. Typically, one party gives the other goods and receives money in exchange. Don’t like the terms of trade? Then don’t trade.
Worrying about the outflow of currency is old-fashioned mercantilism: a mistaken view 200 years ago, and still wrong now.