Tuesday, December 19, 2006

Supporting Global Warming


I have had some email communications with James Killus, an intelligent and polite commenter in blog discussions, who supports the prevalent view of CO2's role of accelerating global warming. His list of publications is impressive, but I have not been able to determine his specific credentials at this time.

James will, in the near future, provide a for-viewing version here of the off-the-cuff exchange we had. While I don't expect that either sides of the global warming debate will change their views, it is good to be sure you understand what the different perspectives are and why they are that way.

As I pointed out to James:

At issue, and I again only point to those scientists who disagree with you on climate change, is what are the real drivers of climate change and what is controllable and what is not... and what the real impact will be. The impact will not be uniformly bad or good if/when significant changes to the climate occur. However, focusing on one aspect... atmospheric carbon dioxide... of environment and climate will probably lead to some very dubious economic and legislative decisions driven by well-meaning people and governments. The law of unintended consequences usually comes into play when one thing is optimized and everything else is sub-optimized based on limited resources (we can't do everything we want to do... or maybe even should do).
I look forward to his insights.


I posted this as part of a very long thread at Economist's View where James was also contributing comments though this was not directed at him:

With a vast and growing population, the first priority needs to be to apply technology that preserves or improves the environment. If some of these technologies can also reduce the uncertainty about the potential harm of higher CO2 levels, that's fine, too. But optimizing the effort to control CO2 will require vast resources and create a substantial risk of suboptimizing other important environmental efforts as limited resources are used. One could factiously ask for volunteers among the 6 or 7 billion humans to stop breathing so much and reduce their CO2 output. But they would soon be replaced anyway.

Additionally, nothing is for free. The cost differential between producing all present vehicles with no CO2 emissions versus today's levels is about $3000 per vehicle. That goes direct to the selling price. That is made up either by lower volumes or less money for use elsewhere. That's billions per year and trillions long term. Yes, electric cars/truck still need a source of power for the electricity and we are talking about a lot more electricity. (Yes, I know about the local power generation schemes...$$$)

Unless you are willing to spring for a lot more nuclear power plants, the cost of CO2 scrubbers for existing and new coal powered plants will be billions in the U.S. The issue is that China and India are the future source of significant new numbers of coal powered plants. They will wipe out any CO2 reductions achieved here. New Thorium-based nuclear power plant designs could be built resulting in magnitudes less radioactive waste and danger of creating weapons grade plutonium. Billions and billions of dollars.

Your assumptions that legislation will lead to future safety may or may not have a basis in reality, but it will have a significant basis in cost.

And this is a site dedicated to economics, after all.


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CO2 Cap and Trade

There is always an easy solution to every human problem—neat, plausible, and wrong.
Henry Louis Mencken (1880–1956)
“The Divine Afflatus,” A Mencken Chrestomathy, chapter 25, p. 443 (1949)
... and one could add "not all human problems really are."
It was beautiful and simple, as truly great swindles are.
- O. Henry
... The Government is on course for an embarrassing showdown with the European Union, business groups and environmental charities after refusing to guarantee that billions of pounds of revenue it stands to earn from carbon-permit trading will be spent on combating climate change.
The Independent (UK)

Tracking Interest Rates

Tracking Interest Rates


SEARCH BLOG: FEDERAL RESERVE for full versions... or use the Blog Archive pulldown menu.

February 3, 2006
Go back to 1999-2000 and see what the Fed did. They are following the same pattern for 2005-06. If it ain't broke, the Fed will fix it... and good!
August 29, 2006 The Federal Reserve always acts on old information... and is the only cause of U.S. recessions.
December 5, 2006 Last spring I wrote about what I saw to be a sharp downturn in the economy in the "rustbelt" states, particularly Michigan.
March 28, 2007
The Federal Reserve sees no need to cut interest rates in the light of adverse recent economic data, Ben Bernanke said on Wednesday.
The Fed chairman said ”to date, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation”.

July 21, 2007 My guess is that if there is an interest rate change, a cut is more likely than an increase. The key variables to be watching at this point are real estate prices and the inventory of unsold homes.
August 11, 2007 I suspect that within 6 months the Federal Reserve will be forced to lower interest rates before housing becomes a black hole.
September 11, 2007 It only means that the overall process has flaws guaranteeing it will be slow in responding to changes in the economy... and tend to over-react as a result.
September 18, 2007 I think a 4% rate is really what is needed to turn the economy back on the right course. The rate may not get there, but more cuts will be needed with employment rates down and foreclosure rates up.
October 25, 2007 How long will it be before I will be able to write: "The Federal Reserve lowered its lending rate to 4% in response to the collapse of the U.S. housing market and massive numbers of foreclosures that threaten the banking and mortgage sectors."
"Should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses," he said.

"Uncertainties about the economic outlook are unusually high right now," he said. "These uncertainties require flexible and pragmatic policymaking -- nimble is the adjective I used a few weeks ago."

December 11, 2007 Somehow the Fed misses the obvious.
[Image from:]
December 13, 2007 [from The Christian Science Monitor]
"The odds of a recession are now above 50 percent," says Mark Zandi, chief economist at Moody's "We are right on the edge of a recession in part because of the Fed's reluctance to reduce interest rates more aggressively." [see my comments of September 11]
January 7, 2008 The real problem now is that consumers can't rescue the economy and manufacturing, which is already weakening, will continue to weaken. We've gutted the forces that could avoid a downturn. The question is not whether there will be a recession, but can it be dampened sufficiently so that it is very short.
January 11, 2008 This is death by a thousand cuts.
January 13, 2008 [N.Y. Times]
“The question is not whether we will have a recession, but how deep and prolonged it will be,” said David Rosenberg, the chief North American economist at Merrill Lynch. “Even if the Fed’s moves are going to work, it will not show up until the later part of 2008 or 2009.
January 17, 2008 A few days ago, Anna Schwartz, nonagenarian economist, implicated the Federal Reserve as the cause of the present lending crisis [from the Telegraph - UK]:
The high priestess of US monetarism - a revered figure at the Fed - says the central bank is itself the chief cause of the credit bubble, and now seems stunned as the consequences of its own actions engulf the financial system. "The new group at the Fed is not equal to the problem that faces it," she says, daring to utter a thought that fellow critics mostly utter sotto voce.
January 22, 2008 The cut has become infected and a limb is in danger. Ben Bernanke is panicking and the Fed has its emergency triage team cutting rates... this time by 3/4%. ...

What should the Federal Reserve do now? Step back... and don't be so anxious to raise rates at the first sign of economic improvement.
Individuals and businesses need stability in their financial cost structures so that they can plan effectively and keep their ships afloat. Wildly fluctuating rates... regardless of what the absolute levels are... create problems. Either too much spending or too much fear. It's just not that difficult to comprehend. Why has it been so difficult for the Fed?

About Me

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Michigan, United States
Air Force (SAC) captain 1968-72. Retired after 35 years of business and logistical planning, including running a small business. Two sons with advanced degrees; one with a business and pre-law degree. Beautiful wife who has put up with me for 4 decades. Education: B.A. (Sociology major; minors in philosopy, English literature, and German) M.S. Operations Management (like a mixture of an MBA with logistical planning)