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Wednesday, February 06, 2008

Money Talks

SEARCH BLOG: GOVERNMENT and CLIMATE

This marks the 1,000th post on this blog.

From The Detroit News:

Bush defended his budget proposal, saying Congress must take steps to reign in the growth of entitlement programs. "Our budget protects America and it encourages economic growth," he said.

The Energy Department proposed flat vehicle research to $221 million, down from $223 million this year, but funding for hydrogen fuel cell vehicle research will take a significant hit, dropping from $211 million to $146 million. Hybrid systems research would be boosted to $103 million, up from $94 million.

The National Highway Traffic Safety Administration would add $2 million and double its staff dedicated to writing new fuel economy regulations in the wake of the energy bill passed in December that requires automakers to increase fuel economy to an industry-wide 35 miles per gallon by 2020.

Just a few comments and observations.

First of all, anyone who has read my blog knows that I am highly critical of the politicization of climate science and the potential economic havoc that it may cause; I'm not alone in those concerns.

While I believe the dramatic concerns about global warming are incorrect and of minor concern... especially as population trends show that people are actively seeking warming climes... I do believe that some long-term good may come of it.
The fact that there is so much effort and money being spent to develop alternatives to fossil fuels is a good thing... not because of any inherent climate change, but because it will move U.S. energy sources away from politically unstable and undesirable energy sources... and that change may well cause those political realms to shrivel in importance.
Now that brings me back to the Bush budget proposal. Going from last to first,
  • spending $2 million dollars to create more bureaucratic red tape while
  • increasing research funding for technology already in the marketplace that still relies on petroleum products and, at the same time,
  • reducing research funding for technology that could eliminate dependence of foreign producers of oil... simply
  • does not support the assertion that the budget protects America and it encourages economic growth
Money talks, President Bush. And this budget says that your administration is not serious about energy independence and protecting America from the likes of Saudi Arabia, Venezuela, Libya, Iran, Russia, etc.

ASIDE: Astute Bloggers ran a post about why the U.S. has to continue to buy some of its oil [now less than 20%] from the Middle East so that we can retain influence in that area.
I agree, but that doesn't mean we should reduce our efforts on research that could eliminate the need to buy their oil at all... especially since it seems unlikely that our Congress is going to expand our own fossil fuel resources.

Europe can continue to buy Middle East oil. After all, it will be an Islamic continent within 100 years given current population trends.

By then, U.S. focus will return to the Western Hemisphere as the Hispanic population approaches a majority. [note the change in absolute and percent of U.S. population between the 2000 and 2006 tabs]

The choice may not be entirely ours to make.
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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

FEDERAL RESERVE & HOUSING

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."
November 28, 2007 FED VICE CHAIRMAN DONALD KOHN
"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."
http://www.reuters.com/

December 11, 2007 Somehow the Fed misses the obvious.
fed_rate_moves_425_small.gif
[Image from: CNNMoney.com]
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 Economy.com. "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)