December 13, 2003 - They call Economics the dismal science. They say that an economist can see the dark cloud in every silver lining. That is because the dynamics of an economy defy definition and what seems to be a common-sense truism often turns out to be quite the opposite. Take, for example, the energy market. With the winter of 2003-2004 upon us natural gas inventories are seven percent higher than at this time last year and three percent higher than the average for the last five years. . Deregulation of the energy market was supposed to result in lower consumer prices by letting the law of supply and demand work. With greater supplies and stable demand we would expect that the market would result in lower prices.

But that is not what is happening. On Friday, December 13 th the price of a million BTU natural gas contract settled at $7.22. On November 30 th the price of the same contract had been $4.93. Natural gas provides for a quarter of the nation's energy needs and provides the feed stock for the chemical, fertilizer, and ammonia industries. If these price levels stand, then they will cascade through the economy as higher costs for heating and electricity and increased costs for the farmers when they put in next years crops. Two of the nation's largest energy companies, Duke Energy and Houston based Dynegy, Inc. were nailed before the run-up with hefty fines for trying to manipulate the natural gas market. Senator Orin Hatch promised to launch an investigation next year. If you are a consumer or chemical manufacturer it's a dark cloud. If you are an investor who guessed right it is a decidedly silver lining.

The Produce Price Index - the measure of wholesale prices fell in November - promising lower prices for manufactured goods in the stores and a silver lining for consumers. But so did the incredible shrinking dollar, setting record lows against the Euro and new lows against the other major currencies - that means higher prices for imported goods and a dark cloud for consumers. Chinese economists, looking at America 's crushing trade deficit with the last surviving Communist regime of consequence, see a shining silver lining; American economists looking at the same phenomenon see a really black cloud.

The rising number of new unemployment claims, the stable number of Americans without jobs; the continuing decline are all dark clouds for the economy. The return of the DOW to the levels of March 2002 are a pale silver lining on which the Administration wants us to focus as the President walks his tightrope toward re-election. All of that may explain why the administration is tilting away from Taiwan and toward Beijing - the Chinese Communists have won the economic war - and the spoils, our consumer economy, belongs to them.