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Iran wins. We lose

Sunday, November 24th, 2013

The announced “six month” agreement between the European nations negotiating with Iran, with the US included, and the Mullahs of Iran is an complete surrender to the Mullahs. I say the Mullahs since it appears that the people of Iran are no more part of the government than were the people of the Soviet Union.

I am not an expert on Iran so I will quote one:

This interim agreement is badly skewed from America’s perspective. Iran retains its full capacity to enrich uranium, thus abandoning a decade of Western insistence and Security Council resolutions that Iran stop all uranium-enrichment activities. Allowing Iran to continue enriching, and despite modest (indeed, utterly inadequate) measures to prevent it from increasing its enriched-uranium stockpiles and its overall nuclear infrastructure, lays the predicate for Iran fully enjoying its “right” to enrichment in any “final” agreement. Indeed, the interim agreement itself acknowledges that a “comprehensive solution” will “involve a mutually defined enrichment program.”

There’s more:

Tehran correctly assessed that a mere six-months’ easing of sanctions will make it extraordinarily hard for the West to reverse direction, even faced with systematic violations of Iran’s nuclear pledges. Major oil-importing countries (China, India, South Korea, and others) were already chafing under U.S. sanctions, sensing President Obama had no stomach either to impose sanctions on them, or pay the domestic political price of granting further waivers.

We are now in a position where we must trust the rationality of the Iranian Mullahs who have previously declared their willingness to die if they can eliminate the state of Israel. Benjamin Netanyahu is not impressed.

“What was concluded in Geneva last night is not a historic agreement, it’s a historic mistake,” Israeli Prime Minister Benjamin Netanyahu told reporters. “It’s not made the world a safer place. Like the agreement with North Korea in 2005, this agreement has made the world a much more dangerous place.”

“For years the international community has demanded that Iran cease all uranium enrichment. Now, for the first time, the international community has formally consented that Iran continue its enrichment of uranium.”

What will happen now ?

We should be eager to see fracking decrease our reliance on middle east oil. The Democrat repudiation of the filibuster will allow anti-fracking regulations to be enacted by extreme Obama appointees who have been held up by the threat of filibuster. One example is this EPA official.

Confirming what many in the industry long suspected, a video surfaced Wednesday in which Al Armendariz, an official at the Environmental Protection Agency, promotes the idea of crucifying oil companies. Armendariz heads up the EPA’s region 6 office, which is based in Dallas and responsible for oversight of Texas and surrounding states. The former professor at Southern Methodist University was appointed by President Obama in November 2009.

He will be joined by others.

On Thursday, after five years of Republican filibusters holding back progress on environmental regulation, Senate Democrats began the process of restoring democratic accountability to their broken institution and eliminated the filibuster on presidential appointments (excluding the Supreme Court). The final straw for the Democrats, who’d been reluctant to invoke the so-called nuclear option: Republicans had refused to allow votes on three qualified, ideologically mainstream nominees to vacancies on the D.C. District Court of Appeals.

The “ideologically mainstream” nominees are closer to the above example than to mainstream as the rest of us understand it. The truth is better explained as:

“Many of us believe the D.C. Circuit is the most important court in the country for environmental health and safety protections,” says John D. Walke, director of the Climate & Clean Air Program at NRDC. “In 90 to 95 percent of Clean Air Act regulatory challenges, they are the only court to rule.”

We can only hope that an Iran-Iraeli war would find us with adequate energy sources in spite of Obama.

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Posted in energy, global warming, Israel, middle east, politics | 1 Comment »

Craig Venter and biofuels

Monday, October 15th, 2012

Biofuels have gotten somewhat of a bad rep with conservatives because they are linked to Obama’s green energy boondoggles. Steve Hayward, at Powerline, thinks that success will be enough to turn the greenies against them. First they will be genetically engineered and will be developed by “Big Oil” partnering with entrepreneurs like Craig Venter who deciphered the human genome with private resources. He was in competition with the government funded “Human Genome Project.” My book review of Venter’s autobiography is here.

Venter does well in explaining his research and the article follows it well.

Venter said in an interview, “It’s pretty obvious that there’s nothing in the natural world to make the levels that are needed,” and he pointed to algae oil yield volumes needing approximately 20,000 gallons per acre equivalent of algae.

Venter and his research team, of course, in spring 2010, successfully created the first synthetic bacterial cell, which was controlled completely by a synthetic genome. Or as Venter explained it in his recent interview, as the first cell “to have a computer for a parent,” or “designed DNA on a living system.” Venter now says he has increasingly realized that a fully synthetic cell is the way to go to create competitive algae fuel. When it comes to tweaking naturally occurring algae cells, he says, “you’ll never get there with that. We need a fundamental change to how we approach all this.”

This will be enough to antagonize the Luddite Greenies who are ideologically hostile to genetic engineering. Some writers are already predicting problems.

Venter, the first mapper of the human genome and creator of the first synthetic cell (pictured above), said his scientific team and ExxonMobil have failed to find naturally occurring algae strains that can be converted into a commercial-scale biofuel. ExxonMobil and Venter’s La Jolla, Ca.-based Synthetic Genomics Inc., or SGI, continue to attempt to manipulate natural algae, but he said he already sees the answer elsewhere — in the creation of a man-made strain. “I believe that a fully synthetic cell approach will be the best way to get to a truly disruptive change,” Venter told me in an email exchange.

Venter made his remarks before a conference this week on the future of energy at the New America Foundation in Washington, D.C., and in subsequent emailed replies to questions.

When announced in July 2009, the Venter-ExxonMobil alliance of colossals attracted wide publicity. It called for ExxonMobil to spend up to $600 million if publicly undisclosed milestones were reached in the lab. The Wall Street Journal said the partnership might signal “a coming of age” for algae biofuel. Greenbang fretted that the alliance might actually prove “unholy,” but not Gigaom, which said it could be “algae’s big break.”

The terms of the alliance omit the fully synthetic approach that Venter is now advocating, so he is conducting “an ongoing dialog” with Exxon about a new agreement, he said. He appeared to suggest that such a new compact would require more Exxon investment.

If I were in charge of investing in alternate energy research, I would take what Venter says very seriously.

I assume that our skill set in this area has been one of the attractions for Exxon to work with us. Our success at building the first synthetic cell is only from last year and had not been achieved when we formed the agreement between SGI and Exxon. So I would say it is an ongoing dialog.

The future lies with algae and modifications of coal. Ethanol is a dead end. Venter is not the only one interested.

One of the dangers of using the synthetic algae cells is the fear that the cells could somehow be let loose on the outside world, which Venter admits could wreak havoc like turning the oceans into a sea of lipids. But Venter says that designing an organism that has self-destructive properties (it can’t live outside a lab, or it dies with a certain time period) could contain such an organism.

Algae oil company Solazyme, went public this year, and plans to commercialize its algae fuel in the coming years. Solazyme tweaks existing efficient algal strains and grows its designer algae in fermentation tanks without sunlight by feeding it sugar and then using existing industrial equipment extracts the oil. Solazyme’s stock is trading a bit under $10, way down from its IPO price of $18.

I would bet on Venter, first of all because he thinks in terms of private, profit making business. His record is pretty impressive and he has hired a lot of the world’s experienced scientists. I have previously written a number of blog posts on related topics, here, and here, and here, and here.

It’s interesting that the Titanic is being eaten by “Rusticles” that that are eating the iron in the hull. Bacteria that eat iron in an oxygen-free environment are only one of the marvels that are being discovered in the depths of the ocean and in hot vents in volcanic pools.

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Posted in climate, global warming, science, technology | Comments Closed

Lawyers and nuclear power

Wednesday, December 1st, 2010

I thought this column, not authored by me, was so important that I am posting it here. I do not understand the eco-left. Do they expect us to live a cold and dark existence ?

By Carl From Chicago-

Due to a failure of our “de-regulation” initiative (I put it in quotes because we just re-regulated differently) with energy the United States has basically ceased investing in base-load power plants, which are comprised of 1) nuclear 2) coal 3) large-scale hydroelectric. Instead we have been generally just extending the lives of our existing assets and building natural gas fired peaking plants and letting our reserve margins erode.

While this has many impacts to the United States over the long term (in the short term we benefit from lower rates as we delay the reckoning of having to invest massive amounts in capital construction in the future rather than starting it now and spreading it out over many years) one other extremely bad negative element has not been adequately discussed. The United States is frankly losing any ability to construct or build nuclear or coal plants efficiently while China is using their scale and continued capital investment to refine construction techniques and standardize processes to build an industry that will be miles ahead of their US equivalent.

The December, 2010 issue of the magazine “The Atlantic” has an article titled “Why the Future of Clean Energy is Dirty Coal”. While I don’t share their focus on “clean” energy, they did have a section on the scale of investment in China that was staggering. From the article:

China is preparing, by 2025, for 350 million people that don’t exist now. They have to build the equivalent of the US electrical system, that is almost as much added capacity as the entire US grid – by 2025. It took us 120 years…As China meets its capacity, it is likely that the best technologies will be commercialized and applied here faster than everywhere else.
In addition to the scale of their investment, their specific investments are also growing more advanced:

For the last 30 years we have not been able to build a coal-to-gas conversion plant in this country… China has done many. That is what we need to learn from them, all that production and operating experience.
Why are they able to get so much done? Well for one thing they don’t have a lawyer and regulation plagued “system” that adds billions (literally) to the cost of a plant without necessarily improving its efficiency or safety; and it punishes new designs that might be INHERENTLY safer than older, operating designs by limiting the ability to move forward in the first place.

In America, it takes a decade to get a permit for a plant… Here, they build the whole thing in 21 months.

As discussed in many of my other posts, the “nuclear renaissance” in the US was an illusion, as is aptly summed up by the current state of ongoing nuclear construction projects in the USA from wikipedia:

As of September 2010, ground has been broken the Vogtle project and one other reactor in South Carolina. The prospects of a proposed project in Texas, South Texas 3 & 4, have been dimmed by a falling out among the partners. Two other reactors in Texas, four in Florida and one in Missouri have all been “moved to the back burner, mostly because of uncertain economics”.
Vogtle works only because Southern Company is a well capitalized utility, and South Carolina works only because SCANA (the utility in that state) has “old school” regulation that allows them to capture the costs of new construction in their rate base as they build it, which is how ALL of the existing nuclear plants in the United States were originally built. We have hope for Texas and in general I always support nuclear power but it will be an uphill battle.

According to this article, China has TWENTY FIVE nuclear plants under construction. While we are battling lawyers and regulators they are able to actually site, build, construct and start operation of brand new nuclear facilities, with designs that are significantly more advanced than the vast majority (existing fleet) of US reactors, which date to designs from the 1960’s and 1970’s.

China is learning lessons about large scale construction and operation of brand new designs while we are trying to extend the lives of our existing, ancient reactors and delivering hot air of plans that won’t materialize, such as the aborted plan to jump start construction in the US, a plan that I pointed out long ago won’t work for a variety of financial and regulatory reasons.

We are losing our ability to even compete. Our only hope is that China will be helpful to us in selling us the technology 20 years from now to build the next generation reactors when our existing fleet has completely broken down and we realize that betting on “alternative” technologies is a drop in the bucket when compared to base load requirements.

Copied from Chicago Boyz.

And Jerry Brown has big plans for “alternative energy” in California.

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Posted in energy, politics | 3 Comments »

Cui Bono ?

Tuesday, December 8th, 2009

There is an ancient Roman proverb, Cui Bono ? This means, “Who benefits ? The meaning also implies that there may be subterfuge in the situation.

L. Cassius ille quem populus Romanus verissimum et sapientissimum iudicem putabat identidem in causis quaerere solebat ‘cui bono’ fuisset.
The famous Lucius Cassius, whom the Roman people used to regard as a very honest and wise judge, was in the habit of asking, time and again, ‘To whose benefit?’

Who is George Soros ?

To read his foundation web page, he is a benefactor of mankind. His superficial biography is one of a young man who sought freedom in the west.

Soros was born in Budapest, Hungary, in 1930. His father was taken prisoner during World War I and eventually fled from captivity in Russia to reunite with his family in Budapest. Soros was thirteen years old when Hitler’s Wehrmacht seized Hungary and began deporting the country’s Jews to extermination camps. In 1946, as the Soviet Union was taking control of the country, Soros attended a conference in the West and defected. He emigrated in 1947 to England, supported himself by working as a railroad porter and a restaurant waiter, graduated in 1952 from the London School of Economics, and obtained an entry-level position with an investment bank.

How did he make his fortune ? The foundation web site doesn’t say. We know, though.

He attacked the currency of the country which gave him refuge.

George Soros gained international notoriety when, in September of 1992, he risked $10 billion on a single currency speculation when he shorted the British pound. He turned out to be right, and in a single day the trade generated a profit of $1 billion – ultimately, it was reported that his profit on the transaction almost reached $2 billion. As a result, he is famously known as the “the man who broke the Bank of England.”

Soros is also famous for running the Quantum Fund, which generated an average annual return of more than 30% while he was at the helm. Along with the famous pound trade, Soros was also cited by some as the “trigger” behind the Asian financial crisis in 1997, as he had a large bet against the Thai baht.

He seems to do quite well by attacking national financial stability. Why should this concern us ?

His other biographical information tells us he is a “philanthropist.” What does that mean ?

The effort or inclination to increase the well-being of humankind, as by charitable aid or donations.

Where does attacking the national currencies of peaceful countries fall under that definition ? Philos is the Greek root for love and Anthropos is another root for man. Maybe we should call him a Philosoros.

Why does this matter ? Well, he is a major funder of the Democratic party and, especially, the left wing of the Democratic party. Some people are worried.

Why would a plutocrat with a history of currency manipulation be supporting left wing activists ?

One aspect of the Democrats’ policy positions is really puzzling. Why are they so adamantly opposed to domestic oil and gas production ? I know they are devoted to the global warming theory but they have not made any attempt to seek alternatives, like nuclear power. What is George Soros’ position on carbon dioxide and global warming ?

Well, he is on record supporting the Democrats’ position, even offering to donate a billion dollars and “I will also insist that the investments make a real contribution to solving the problem of climate change.” So there he is, on record.

Why then, is he the largest investor in Brazil’s massive offshore oil program ?

Petrobras, which until recently was little known outside oil circles, has launched a five-year, $174 billion project to provide platforms, rigs, support vessels and drilling systems to develop tens of billions of barrels of oil. Energy officials here project that Brazil — still an oil importer five years ago — will in the next decade have one of the world’s biggest oil reserves.

“It’s going to change the role of Brazil in the geopolitics of oil,” Petrobras’s president, José Sergio Gabrielli, said in an interview at the company’s headquarters in Rio de Janeiro. “We are going to become a much bigger producer.”

So, Brazil, unlike the US, is planning a massive drilling operation offshore. In fact, even if we belatedly decided to “drill, baby, drill” in our offshore oil fields, we could not do so as Brazil has long term leases on all the deep sea drill rigs for the next 10 years.

Who is the largest investor in this massive project ?

With a market capitalization of more than $220 billion, Petrobras is one of the world’s 10 biggest companies. Over the past two years, it has been the most frequently traded foreign company on the New York Stock Exchange, trade data show. Among investors bullish on Petrobras is George Soros, who last year made the oil company the largest single holding in his investment fund, according to Bloomberg.

Is this another of George’s ventures where he sells his country short, makes yet another fortune and retires to some small country that is safe and secure ? Are the Democrats that stupid ?

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Posted in energy | 4 Comments »

Yes, global warming is man-made

Friday, November 27th, 2009

UPDATE # 3: The IPCC chair says there is no problem. “Peer review” will save us. Full speed ahead to Copenhagen.

No surprise there.

UPDATE # 2: More chicanery. The raw data was dumped years ago and there is no way to check their work. This is not science.

UPDATE: Little Green Footballs blogger Charles Johnson, who became famous over the Bush TANG story (He was the first to demonstrate the fact that the alleged 1972 memo was written on a computer with Times New Roman font), has gone off the deep end on the climate data manipulation story and is attacking all the stories about data manipulation and falsification as “lies.” Charles is an expert by virtue of the fact that he is a musician. He seems to have gotten obsessed with creationism and this has led to his downfall on these other issues.

From his link, a comment explains it all:

Thanks, Gareth – NZC”S”C revealed yet again to be idealogues and propagandists with little knowledge of either climate or science; mere shills for the fossil fuel industry who fund them through the Heartland Institute.

And we know who funds the alarmists.

There is another comment that makes a much more sensible point:

Sorry CJ, this time your avoiding some troubling facts. If you haven’t go look at the code (I know your skilled in this area and you will see how bad this PhD quality code is to real SW that can endanger people). For those of us who stood by you on Rathergate, while your credibility was attacked by folks who don’t know why you made sense, you should realize there are some of us just as insightful and trained to detect bad assumptions, questionable massaging, unfounded theories on global climate.

The fact is the raw data across the globe (even the CRU raw temps) don’t show runaway global warming. It’s not just the emails (which you have been cherry picking, avoiding the hard ones where people tell others to illegally destroy data). It’s the code with hard coded overwrites. It is the deletion of data that tells a contradictory story, of cutting off the picture when it looks bad.

Honestly, I thought much higher of you than this.

BTW, to disagree with global warming does not make you a Palinista or Right winger. They can be right for the wrong reasons. Just like loving you family doesn’t make you an evil right winger – something else they have in common with all of us.

Whatever your issues forget them and look at the code and the data objectively. And realize Jones, Mann et al were persecuting people with differing theories and opinions. They were the ones acting like right wing purists – not us independents who just happen to be able to detect hundreds of problems with the current theories and the methods they use to hide the full picture.

Look at the entire picture, no matter how uncomfortable

This is an example of the fact that, unlike most left wing blogs, Johnson is still posting critical comments. We’ll see how he responds.

Unfortunately, he responds like a left wing blog:

re: #35 AJStrata

And I thought much more highly of you too, before learning that you’re a hardcore climate change denier who’s not above distorting and misrepresenting facts.

Oh well. He was right about the Bush story. I don’t know where this stuff came from.

It is now becoming clear that global warming is man-made. The cause is not CO2 but something simpler and more easy to explain. It was caused by the manipulation of data for the purpose of creating a fraud. When bankers and stock brokers do it, they go to jail.

Kiwigraph1

This is what the official New Zealand National Institute of Water and Atmospheric Research has posted as the unmistakable trend of temperature since 1853 in New Zealand.

Kiwigraph2

This is a graphic created from unaltered raw data, which is fortunately still available from their files. The raw data at the East Anglia CRU has been destroyed, making such a comparison impossible.

Straight away you can see there’s no slope—either up or down. The temperatures are remarkably constant way back to the 1850s. Of course, the temperature still varies from year to year, but the trend stays level—statistically insignificant at 0.06°C per century since 1850.
Putting these two graphs side by side, you can see huge differences. What is going on?
Why does NIWA’s graph show strong warming, but graphing their own raw data looks completely different? Their graph shows warming, but the actual temperature readings show none whatsoever!
Have the readings in the official NIWA graph been adjusted?
It is relatively easy to find out. We compared raw data for each station (from NIWA’s web site) with the adjusted official data, which we obtained from one of Dr Salinger’s colleagues.
Requests for this information from Dr Salinger himself over the years, by different scientists, have long gone unanswered, but now we might discover the truth.

At least the data was not destroyed as it has been at East Anglia.

What did we find? First, the station histories are unremarkable. There are no reasons for any large corrections. But we were astonished to find that strong adjustments have indeed been made.

About half the adjustments actually created a warming trend where none existed; the other half greatly exaggerated existing warming. All the adjustments increased or even created a warming trend, with only one (Dunedin) going the other way and slightly reducing the original trend.
The shocking truth is that the oldest readings have been cranked way down and later readings artificially lifted to give a false impression of warming, as documented below. There is nothing in the station histories to warrant these adjustments and to date Dr Salinger and NIWA have not revealed why they did this.

These people who committed this fraud (I agree that hoax is not the proper term as it is too benign) should be prosecuted. They were paid government funds to do research and they falsified it. Why ? That is still to be determined but there are several possibilities. They could have convinced themselves that the natural slight warming trend after the end of the Little Ice Age was more serious. They could be ideologically opposed to modern life and especially capitalism. Maybe they just thought that more funds for research would be forthcoming if a crisis was created.

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Posted in corruption, energy, politics, science | 7 Comments »

Gold and the future.

Tuesday, November 17th, 2009

Here is a piece about the price of gold and the future of the economy that has the ring of truth. Of course, I am a pessimist.

The rise in the gold price above $1,100 per ounce last week is a pretty good indicator that something has changed. For 18 months, the gold price had been in a trading range topping out around $1,000. It has now broken out decisively from that range. The opportunity for the world’s central banks to change policy and affect the economic outcome has been lost. The world economy is now locked on to an undeviating track towards another train wreck.

At most times, the gold price is not an economically significant indicator. In 1980-2000, it declined irregularly from $850 to around $280, and movements in it seemed to have had little or no effect on the global economy. That’s what you’d expect; even at $1,000 per ounce, the global production of gold is only around $100 billion annually, which would put the entire world’s gold extraction industry only 17th on the Fortune 500. When Gordon Brown sold Britain’s entire gold reserves in 1999, at a price below $300 per ounce, it seemed a defensible decision. I went to a meeting in 2001 hosted by a diverse group which believed that the U.S. Treasury was conspiring to suppress the gold price, and my main thought was: why would Treasury bother?

The decline was, I believe, an indicator that inflation, at great cost, had been wrung out of the economy for decades. I bought gold at $405 an ounce in 1978 and sold it six months later for $810. Thereafter, it slowly declined. When Bill Clinton was elected, I bought gold shares and they made a nice profit his first year in office. After 1994, I sold them and made about an 80% profit on the deal. A few years ago, when gold had been slumping along around $300, I thought about buying again. I wish I had.

However, in relatively few periods, gold becomes of immense importance. When investors lose trust in conventional currencies, because monetary policy appears set to debauch them, gold is the immediately available safe haven. During such periods, gold’s former importance as a store of value becomes uppermost in the public mind, and its price becomes a major economic indicator.

Gold became important from about July 1978 to early 1980, during which period its price rose from $185 to $850 per ounce. For that 18 month period, the price of gold was the most important factor in day-to-day market fluctuations. The gold price, more than the inflation rate directly, moved markets and by extension moved monetary and to some extent fiscal policy in the major economies. Only after Paul Volcker took over at the Fed in late 1979 did M3 money supply begin to supplant it in investors’ analyses.

We now appear to be at the beginning of another such period.

I agree and am very worried about the future. Obama seems locked in a leftist ideology that nothing can change. He has no experience in the world, academia and “community organizers” being sheltered from reality. I wonder sometimes about his progress from college student to Senator and tend to be a bit paranoid about it. He really is a mystery man.

Ben Bernanke’s Fed is ignoring this. It insists that it will maintain interest rates at the current near-zero level for an extended period, regardless of what the gold price does. By this, it is ensuring that the present bubble in gold and commodities will play out to its full extent. Had the Fed begun to tighten gently during the late spring or early summer, when it had become obvious that the U.S. economy was bottoming out, but while stock markets remained subdued and gold remained within its 2008-09 trading range, it’s possible that it could have deflated the incipient bubble, steering the U.S. and global economies back on to a sustainable growth path. The U.S. Treasury would have had to cooperate by beginning to reduce the federal deficit, but at this stage with unemployment in the 10% range, there would have been no need for draconian action on that front.

With current Fed policy, gold is headed rapidly toward $2,000 per ounce, probably within six months. The forecasters who see such a price, but suggest it would take four to five years to get there, are ignoring history. Since gold was able to get from $185 to $850 in 18 months in 1978-80, there is no reason why it cannot get from $1,100 to $2,000 in six months now. What’s more, although 1980’s peak seemed madness at the time, and was equivalent to nearly $2,400 today, there is no reason why gold cannot go much higher if it is given another year or so to get there.

If I had a store of liquid funds available, I would buy gold now, even at $1100. Instead I have two houses and a child in college so my options are limited. Houses, even with mortgages, are probably better to hold than dollars for the next few years but they are not very liquid. I remember very well the survivalist mentality of the late 70s when people were stocking up dried food and other supplies for a period of unrest. If we get to 15% unemployment, and I think we will, those lessons may need to be learned again.

We only thought that Carter was the worst president ever. Who knew that the lesson would have to be learned again?

Read the rest of that piece. Here is another segment:

At some point, probably before the end of 2010, the bubble will burst. The deflationary effect on the U.S. economy of $150 plus oil will overwhelm the modest forces of genuine economic expansion. The Treasury bond market will collapse, overwhelmed by the weight of deficit financing. Once again, the banking system will be in deep trouble. The industrial sector, beyond the largest and most liquid companies and the extractive industries, will in any case have remained in recession – it is notable that, in spite of the Fed’s frenzy of activity, bank lending has fallen $600 billion in the last year. Unemployment, which will probably enter the second downturn at around current levels, will spike further upwards. The dollar will probably not collapse, but only because it will have been declining inexorably in the intervening year, to give a euro value of $2 and a yen value of 60 to 65 yen to the dollar.

In the next downturn, the Fed will not be able to cut interest rates, because inflation will be spiraling, as in 1980. Instead it will need to raise them while dealing with a profound crisis in the bond markets. Capital in the U.S. will become still more difficult to come by, and unemployment will approach 15%.

Maybe another 1994 Congressional turnover will save us but I think it may be too late.

UPDATE: We are now learning that some of the actions taken last year were unnecessary, which makes us wonder why they were taken.

In the fall of 2008 the New York Fed drove a baby-soft bargain with AIG’s credit-default-swap counterparties. The Fed’s taxpayer-funded vehicle, Maiden Lane III, bought out the counterparties’ mortgage-backed securities at 100 cents on the dollar, effectively canceling out the CDS contracts. This was miles above what those assets could have fetched in the market at that time, if they could have been sold at all.

The New York Fed president at the time was none other than Timothy Geithner, the current Treasury Secretary, and Mr. Geithner now tells Mr. Barofsky that in deciding to make the counterparties whole, “the financial condition of the counterparties was not a relevant factor.“

Whaaat ??? Read the rest.

UPDATE # 2: The story of TARP and it isn’t pretty.

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Posted in financial | 10 Comments »

What is a basic education ?

Saturday, September 19th, 2009

I have been spending a lot of time with the health reform legislation lately and have begun to wonder what people understand and what the consequences are of failure to understand some basic concepts. I’m not the only one.

What kind of education would one need to make sense of the current health-care debate? As the U.S. rethinks its academic standards and international competitiveness, this is not a bad time to ask what American citizens, voters, and taxpayers need by way of knowledge and skills to form reasonable conclusions about the hottest domestic policy issue of the day.

Today’s elites seem certain that John Q. Public is irremediably ignorant about, and perhaps oblivious to, the health-care debate, and thus susceptible to being misled, brainwashed, or cowed. Some Democrats are convinced that the insurance industry is creating “movements” bent on misleading and confusing people and planting suspicion in their hearts, while at least one GOP congressman and more than a few conservative pundits and talk-show hosts say President Obama is lying. All these folks seem to assume that the masses cannot possibly understand the debate. But must we accept that as a given? What would it take to comprehend the health-care battle?

OK, how do we get that education ? I grew up in the 1940s and 50s, went to Catholic school and still have sharp memories of my early schooling. For example, I was reading (For the 20th time, at least) The King Must Die, by Mary Renault, one of my favorite authors. It brought to my mind that, in elementary school, I learned the fact that King Minos had a great fleet and that Crete had “wooden walls” on the sea. These small items of history were common in elementary education at the time I was a child. I wonder how many children today would know what I was talking about.

I read to my children as they grew up. When they were small, I read “The Lord of the Rings” and “Watership Down,” both fantasy literature. Interestingly enough, children’s literature is now being de-monsterized meaning the scary stories are being removed so that children are not frightened by the stories. I can’t find the link right now where this was discussed but it makes clear that there is a reason why children’s literature has so many frightening stories. Those fears are part of children’s lives and working them out in fiction may be helpful in assisting children to cope with the real events of life. Most fairy tales are actually based on frightening events. Jack and Jill fell down the hill. Hansel and Gretel were abandoned by their parents in the woods. Sleeping Beauty and Cinderella both had wicked stepmothers in an era when the possibility of the death of mothers was very real.

All of my children read although reading seems to increase in attraction as they grow older. Reading for pleasure is an activity of childhood that has been devastated by television. Children who do not read a lot, have difficulty with reading and with reading comprehension. It is a skill that grows with practice. They will learn no history from television. Only reading will bring them into a historical world where things fit into place in the greater scheme of things. It was easier for me because we had no television. In fact, because my father was in the juke box business, he hated television and refused to have one in the house. When I was in eighth grade, I didn’t know who Jackie Gleason was. That was a social handicap. Eventually, a family friend gave us a TV set for Christmas and the barrier was broken. Fortunately, by that time habits of a lifetime were set and I have never been much interested in TV. At one time, with my first wife, I had a set of earphones with a long cord. I would sit and read with the earphones on as she watched TV. I mostly listened to classical music in those days. It goes well with reading.

What do we do about the poor quality of schools today ? I don’t know. Spending lots of money on schools isn’t the answer.
In 1977, when the story begins, Kansas City’s schools were in simply terrible shape. The city, like most others of its size (pop. 460,000), had experienced white flight from the 1950s on, and the school district even more so, even whites resident in the city pulling their kids out of the public schools. By 1977 enrollment was 36,000, three quarters of them racial minorities (which at that point meant mostly African Americans). The voters had not approved a tax increase for the district since 1969. In 1977 litigation commenced, members of the school board, district parents, and some token children suing the state and some federal agencies on the grounds they had permitted racial segregation. Federal judge Russell Clark, a Jimmy Carter appointee, got the case.

The solution seemed obvious.

After eight years of litigation, Clark gave the plaintiffs everything they wanted, and then some. He in fact ordered them to “dream” — to draw up a money-no-object plan for the Kansas City school system.

Dreaming is no problem for educationists. The plaintiffs — education activists and their lawyers — duly dreamt, with an initial price tag of $250 million for their dreams. This was twice the district’s normal annual budget.

It proved to be only a start, however. Over the next twelve years the district spent over 2 billion dollars, most of it from the state of Missouri, the balance from increased local property taxes. Fifteen new schools were built and 54 others renovated.

The results ?

After twelve years, test scores in reading and math had declined, dropout rates had increased, and the system was as segregated as ever, in spite of heroic efforts to lure white students back into the system.

Kansas City did all the things that educators had always said needed to be done to increase student achievement — it reduced class size, decreased teacher workload, increased teacher pay, and dramatically expanded spending per pupil — but none of it worked.

The great C-130-loads of money being air-dropped on the system also brought about waste and corruption on a heroic scale. Theft was rampant. So was overmanning: The project became a huge jobs and patronage program, with the inevitable mismanagement and scandals.

So that’s not the answer. I don’t know what it is, beyond the obvious, but I do know that an educated citizenry is necessary for a democracy to flourish and I think we are in big trouble because we have a lot of citizens who don’t read and know no history. And they vote.

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A commencement speech worth listening to.

Monday, May 18th, 2009

This commencement speech, unlike the one at Notre Dame, would have been worthwhile. I hope they appreciated it.

There may be no greater challenge facing mankind today – and your generation in particular – than figuring out how we?re going to meet the energy needs of a planet that may have 9 billion people living on it by the middle of this century. The magnitude of that challenge becomes even more daunting when you consider that of the 6.5 billion people on the planet today, nearly two billion people don?t even have electricity – never flipped a light switch.

Now, the “consensus” back in the mid-1970s was that America and the world were running out of oil. Ironically, some in the media were also claiming a scientific consensus that the planet was cooling, fossil fuels could be to blame, and we were all going to freeze to death unless we kicked our fossil-fuel habit. We were told we needed to find alternatives to oil – fast. That task, we were told, was too important to leave to markets, so government needed to intervene with massive taxpayer subsidies for otherwise uneconomic forms of energy. That thinking led to the now infamous 1977 National Energy Plan, an experiment with central planning that failed miserably. Fast-forward to today, and: déjà vu. This time the fear is not so much that we?re running out of oil, but that we?re running out of time – the earth is getting hotter, humans are to blame, and we?re all doomed if we don?t stop using fossil fuels – fast. Once again we?re being told that the job is too important to be left to markets.

I think the population growth figures are overblown but that’s the only thing I disgree with.

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Republican corruption

Saturday, August 9th, 2008

There are several different kinds of corruption. One kind results in $50,000 in cash hidden in a refrigerator. Another results in a “bridge to nowhere.” The latest example is one of a group of self-interested Republicans who, for personal advantage, risk the loss of the presidential election.

Kim Strassel, in the Wall Street Journal, explained what they did.
It’s taken time, but Sen. McCain and his party have finally found — in energy — an issue that’s working for them. Riding voter discontent over high gas prices, the GOP has made antidrilling Democrats this summer’s headlines.

Their enthusiasm has given conservative candidates a boost in tough races. And Mr. McCain has pressured Barack Obama into an energy debate, where the Democrat has struggled to explain shifting and confused policy proposals.

Still, it was probably too much to assume every Republican would work out that their side was winning this issue. And so, last Friday, in stumbled Sens. Lindsey Graham, John Thune, Saxby Chambliss, Bob Corker and Johnny Isakson — alongside five Senate Democrats. This “Gang of 10” announced a “sweeping” and “bipartisan” energy plan to break Washington’s energy “stalemate.” What they did was throw every vulnerable Democrat, and Mr. Obama, a life preserver.

Now we know why.

There’s one word that explains why these five Republicans are selling out: Biofuels. The gang’s “compromise bill” contains billions in subsidies for research into biofuels, and for the manufacture of ethanol-burning cars.

Thune is from the corn-producing state of South Dakota and has always been a big advocate for corn ethanol. The flagship university in Corker’s home state of Tennessee houses a major biofuels research center, specializing in cellulosic ethanol from switchgrass. Chambliss is the ranking member of the Senate Agriculture Committee. He and Isakson both represent Georgia, where they are trying to figure out how to turn Georgia peanuts into fuel. And Graham — well, Graham just seems to have a mania for joining bipartisan gangs.

I don’t know if the definition of treason includes risking a president as inept as Obama but this is pretty lame. Of course, none of them is up for re-election but you’d think they would like to be in the majority again. When the ethanol lobby, and ADM, says shit, they squat and strain. Sorry. I can’t think of another metaphor as accurate.

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Democrats stand athwart history saying STOP!

Friday, July 11th, 2008

UPDATE: Senator Cornyn agrees and plans to make this a focus of the fall campaign.

The present crisis in oil and gasoline prices may be aggravated by speculation in the futures market but the principle factor is supply and demand. China and India are industrializing, a process that will only accelerate in the next decades, and their oil consumption is rising. Alternate energy sources must be developed. Nuclear power has been blocked from expansion by a weird combination of aging 1950s era ban-the-bomb activists

President Bush is promoting the use of nuclear power plants to generate electricity. It seems a political choice. Investing in nuclear power plants can be attempted only by very large corporations, of the kind that are in his support base. They belong to a very exclusive big-money club, and there are many billions of dollars at stake. But to belong, one also has to be willing to forget Three Mile Island, to forget market economics, nuclear proliferation, radioactive waste and, in particular, to forget nuclear terrorism.

and environmentalists who would prefer that much of the world’s human population die off quietly.

We must also work to slow population growth by increasing access to voluntary family planning and reproductive health programs so that families are better able to choose the number and spacing of their children. The Sierra Club’s Global Population and Environment Program supports efforts to empower women and families through education about responsible reproductive health and natural resource use— vital components of the global goal to secure a healthier environmental future.

The Congressional Democrats seem to be determined to obstruct any attempt to increase oil production domestically in spite of possible serious consequences at the polls this fall.

“This call for drilling in areas that are protected is a hoax,” Ms. Pelosi said. “It’s an absolute hoax on the part of the Republicans and this Bush administration.”

I hope John McCain is flexible enough and quick enough to use this issue to change the dynamic of the Congressional elections. With Congress’ approval rating at 9%, the entire theme of the 2008 elections, massive defeat for Republicans, may not be inevitable.

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