Friday, February 23, 2007

Environment, Energy, Economy


In so much of what I have read and even written, there are issues of environment, energy and the economy that overlap and may conflict. It is a difficult challenge to separate much of the particulars into neat categories and identify conflicts or contradictions.

For example, let's look at the issue of oil and it's alternatives.

The use of oil is primarily an economic one. Oil has the advantage of amply supply, great distribution and a transportation market designed around oil products. Oil as an energy source is superior to ethanol in the mileage it delivers per gallon. It has distinct environmental drawbacks from all manner of pollution from spills to emissions that foul the air.
When one looks at the alternatives to oil, the same issues face us. For example, ethanol has been pushed as an alternative fuel.
Ethanol is not a good economic alternative at the present price of oil; it requires significant subsidies, it disrupts the corn market, and does not have a good distribution system. It does not produce as much energy per gallon as gasoline. Ethanol has environmental issues because of emissions of pollutants that cause smog plus it continues to create CO2 which has become a political pariah.
How about battery-powered cars?
There is both a technical and economic issue with batteries as a replacement for gasoline. The range of battery-powered vehicles is limited without a supplemental small engine and overall energy usage may be more than a small gasoline-powered vehicle. Then there is the overriding environmental issue of what to do with the dead batteries.
How about hydrogen-powered vehicles?
Hydrogen gas as the source of power for vehicles sounds great, but there is presently no economical method of producing large quantities of this gas and distributing it for consumption. Furthermore, hydrogen gas is essentially a battery... a storage medium... that requires other sources of energy for production... such as nuclear or coal-powered electricity generating plants which have bad environmental reputations.
So when dealing with issues such as "global warming", one must critically look at the alternatives. Alternatives to oil are just one area of discussion. A similar discussion is necessary for coal... and another for nuclear power.

There are many potential alternatives being tossed around. For example, plasma arc technology is being developed for destruction of virtually all wastes except nuclear waste. Plasma arc incineration plants could be built at current landfills and eliminate the need for further landfills. They reduce all waste to its atomic components and, in the process, creates more electricity than it consumes... one disposal site could power a city and eliminate most environmental threats... while actually reducing the cost of waste management. That's a potential win in all three categories of economy, energy and environment. The problem is that this alternative is only getting a start.

There is a tendency to be one-sided in response to perceived problems. The CO2 alarmists want to focus only on efforts to reduce CO2 whether the efforts have detrimental economic, energy, or environmental side-effects. The rush to action... especially political action is often at the expense of other real human concerns.

Here's one: safe water. With population growing ever faster, the availability of safe water may be more pressing than "solving" the CO2 "problem." It just doesn't have the PR that other issues have.

Economic, energy and environmental concerns need critical and balanced solutions. Otherwise, we can "solve" one area of concern and bring chaos in others.

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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)