The Symptom Versus The Disease

ON RESOURCE NATIONALIZATION AND RESULTING INCREASES IN PRICES:

Philosophically, I wonder if it is worth exploring the idea that producing countries ALWAYS (as a permanent condition) have a natural bias towards nationalization. If you accept this as a permanent condition (a big if), then the question becomes: what causes situations where the political forces in the producing countries gain the upper hand (e.g. 1973-1974, 1979, today)? Conversely, what creates situations where political forces within and/or among the producing countries break rank (Saudi Arabia in the 80s)?

I would argue that there is clear evidence these situations are caused by a disruption of market forces by consuming countries. Most often, this disruption of market forces is the fixing interest rates below the "natural rate of interest" (the result of which is overconsumption, or seen another way the monetary base and total credit growing faster than GDP, referred to in the vernacular as printing money). As evidence, I would point to two facts:
1) statically, the printing of money occurred leading up to the two oil spikes in the 70s, and again today;
2) today, as then, the commodity bull market has been broad based, such that each commodity has its own internal market "symptoms," but they all stem from the same disease.

Regarding the idea that producing countries have a bias towards nationalization, I have lived in several producing countries, and my experience has been that the political mentality is different than a consuming country. In a producing country the feeling is: "It is the companies and foreigners that benefit from exploiting our natural resources, so we need some means to ensure that the wealth from these resources is shared with the rest of the citizens." In the consuming countries, the political mentality is: "The consumer is the basis of our economy and needs to be supported and encouraged."

Historically, during times of inflation, it is more politically expedient to blame others, so the consuming societies tend to point the finger at the producing countries. Eventually, interests in the consuming country become divided by continual broad-based inflation (mainly along the lines of creditors vs. debtors). These divisions usually take one of two roads: warfare against the scapegoat, or higher interest rates.