Life Span of Oil

James Petholoukis in his Capital Commerce blog reviews the varying opinions on the life span of oil as a energy resource and offers his opinion that is will become an important political and economic debate in "Are the Democrats the Peak-Oil Party?" Some excerpts follow:

"We have to understand how weak [Iran] is," explained Sen. Joe Biden last month at the Democratic presidential debate in Nashua, N.H. "They import almost all of their refined oil. By 2014, they are going to be importing their crude oil." If Biden really meant to say what he said, that places him firmly in the camp of those analysts who believe in "peak oil" and predict that global oil production will soon decline even as demand continues to rise, with the results being ever higher oil prices and shortages.

Peak oilers contend that the Middle East oil reserves are vastly overstated. Some, the minority to be sure, even think that global oil production will fall so far, so fast, that western civilization will have to return to some sort of pre-industrial way of life. Here are some choice predictions from one well-known proponent of the theory, James Howard Kunstler:

"One huge implication of the oil peak is that industrial societies will never again enjoy the 2 to 7 percent annual economic growth that has been considered healthy for over 100 years. This amounts to the industrialized nations of the world finding themselves in a permanent depression...The future is therefore telling us very loudly that we will have to change the way we live in this country. The implications are clear: We will have to downscale and rescale virtually everything we do...All indications are that American life will have to be reconstituted along the lines of traditional towns, villages, and cities much reduced in their current scale. These will be the most successful places once we are gripped by the profound challenge of a permanent reduced
energy supply."

Clearly, the members of the National Petroleum Council, a federal advisory group representing the oil industry, are not believers in peak oil. "Fortunately, the world is not running out of energy resources," concludes a new report. "Coal, oil, and natural gas will remain indispensable to meeting total projected energy demand growth. "But the report does advocate that the United States [make many clean and green changes.]

My [Pethokoukis] take: Between fears of global warming and higher energy prices, energy looks certain to be a major issue for the first time in a presidential election since 1980. Democrats already seem to have realized and are formulating specific plans, like Hillary Clinton's idea of a $50 billion
energy research fund, or a similar $10 billion "New Energy Economy" fund that John Edwards is proposing.

The GOP isn't quite there yet as far as addressing this as an issue with specifics. Rudy Giuliani, as part of his website's "12 commitments," merely says, "I will lead America towards energy independence." Mitt Romney advocates spending "more research dollars in power generation, fuel technology, and materials science. It is in new technologies that we will find solutions to our environmental and energy needs."

I strongly agree this will become a much larger issue. I know that Giuliani has promised to flush out in detail each of his "12 Commitments" over the course of the campaign as I suppose they will all. I also know that most energy stock analyst are on the "non-peak" side and watch the energy estimates of the oil companies very carefully, and that watchfulness lead to a shake-up in BP's management not too long ago.

Changing Demographics

My last post touched our lack of of focus on South American countries to our detriment which is primarily due to the focus on the Middle East and Iraq in particular. The following is a bit of an analysis about the relationship of Catholicism and Europe but does highlight how the demographics of the world is both so important and so rapidly changing. By the way, it is from a weekly email from John L. Allen, Jr., who in his work in covering the Vatican for the National Catholic Reporter, ends up covering the world. Here is a portion of his regular column All Thing's Catholic in "The Vatican's Changing Relationship with Europe":

Mega-Trends

1. World Catholicism
A church long dominated by Europe and the United States is becoming steadily more global. The most important bit of data is this: In 1900, just 66 million Catholics, representing 25 percent of the global Catholic total, lived in Africa, Asia and Latin America. Today 720 million of the 1.1 billion
Catholics in the world live in those regions, representing 66 percent, or two-thirds, of all Catholics alive. That's an enormously rapid shift, and it implies a rising Southern tide in Catholicism over the 21st century. Mumbai, Nairobi and São Paulo will be to the 21st century what Paris and Milan were to the Counter-Reformation era in the 16th century, meaning the places where new energy first begins to stir. This will drive a far-reaching transformation of Catholic faith and practice.

2. Secularism and Catholic Identity
In response to runaway secularization in Europe and other pockets of the West, Catholicism today is practicing what sociologists call a "politics of identity," aggressively reinforcing its traditional doctrines, rites, and devotional practices. It's a 21st century Catholic version of how Judaism
responded to the destruction of the Temple and the reality of living in diaspora: "building a fence around the law." Just last week has seen two classic examples, with decisions from Pope Benedict XVI to widen use of the pre-Vatican II Latin Mass, and a declaration from the Vatican that Catholicism is the lone true church willed by Christ.

3. Multipolarism
While the economic and military superiority of the United States will not vanish in the 21st century, the rise of a number of other states and non-state actors is creating a more "multi-polar" world with multiple centers of power and influence. Two clusters seem poised to be especially consequential: what Goldman Sachs calls the "BRIC" nations of Brazil, Russia, India and China, who together
represent 40 percent of the world's population, and whose combined economies by 2040 are projected to be larger than those of the United States or Europe; and an emerging "Shi'a axis" from the Mediterranean to Central Asia, in which Iran will play a leadership role.

Labor's Impact on Free Trade: Bad Economics, Bad Foreign Policy, Bad for America

It seems that only a few strong sources report on the trade shenanigans of the US Congress. Bob Novak is one of the most clear which he continues in "How Labor Rules." Read it all to belueve it. This is bad economics, bad foreign policy, very bad for all Americans including, I believe, big labor, and bad for America.

Ignoring pleas from outraged South American governments, Democratic leadership of the House this week was adamant about Congress going into its August recess without taking action on free trade agreements with Peru and Panama as promised....

Why did House Speaker Nancy Pelosi renege on her previous commitment? She dances to the tune of AFL-CIO President John Sweeney, who preaches outright protectionism. Hostility toward not only the Peru and Panama pacts but also a vital agreement with Colombia can be traced to influence on U.S. unions by South America's leftist labor leaders, originating in Hugo Chavez's Venezuela.

Beyond U.S. unpopularity in the Western Hemisphere, this exposes deeper problems for the new Democratic majority in Congress. While the AFL-CIO's authority is diminished in the labor movement and among the nation's workers, its chief rules in Congress. Democrats bowed to Sweeney's wishes in voting to end secret ballots in union recognition elections, but the more audacious demonstration of labor's influence on Capitol Hill was getting the House leadership to renege on a bipartisan deal affecting world trade.

Democratic leaders are impervious to the reality that Colombia, Peru and Panama now enjoy one-way trade access to the United States, whereas the agreements would open their markets to U.S. goods. Nor do the Democrats show concern about alienating Uribe and Garcia as Hugo Chavez's menace spreads through the hemisphere.

Sweeney's marching orders are not limited to Latin America. He dismisses the negotiated agreement that finally would open South Korea to U.S. autos as "a losing, one-sided agreement." Obediently, House Democratic leaders declared the Korean pact dead on arrival.

Earmarks: McHenry, Murtha & The House

Two stories that say a lot about the US House Of Representatives:

From The Crypt's Blog at Politico.com entitled "What's In Your Wallet?":

Republican Rep. Jeff Flake of Arizona, the fiscal crusader who's never met an earmark he likes, questioned Democratic Rep. Peter J. Visclosky of Indiana on the House floor Tuesday about whether the Center for Instrumented Critical Infrastructure actually exists - since, hey, it's getting like a million bucks or something.

Visclosky, who chairs the spending subcommittee responsible for the project, had to admit that, well, he didn't have a clue.

After a lengthy back-and-forth, Flake, complaining that his staff couldn't find a website for the center, asked Visclosky, "Does the center currently exist?"

"At this time, I do not know," the Indiana Democrat replied. "But if it does not exist, the monies could not go to it."

And who could possibly be the sponsor of such an earmark? Yes, you guessed it, the man Republicans love to hate, Pennsylvania Democrat John P. Murtha. Despite the money's uncertain destination, the House rejected Flake's measure to strike the funds, 326-98. And the Visclosky bill also sailed through, 312-112.

And this update now in the article:

UPDATE: I failed to report last night that a certificate filed with the requested funds says the money is actually earmarked to Concurrent Technologies Corporation, a nonprofit technological consulting firm. A brief search of campaign finance records shows CTC President and CEO Daniel R. DeVos, of alternately Central City and Johnstown, Pa. has contributed $7,000 to Murtha's reelection campaign since April 2002.

Now, story number two concerning my own Representative from North Carolina, from the Winston-Salem Journal, "House Axes Perfect Christmas Tree":

The House killed The Perfect Christmas Tree.

When U.S. Rep. Patrick McHenry, R-10th, asked for federal tax money to expand a commercial development in rural Western North Carolina known as the Home of the Perfect Christmas Tree, the House turned him down flat.

So far this year, the House had not voted to reject a single earmark request - until this one.

McHenry had angered so many House members with attacks on earmarked spending that when he put in a request of his own, the long knives came out.

By a 249-174 vote, the House voted on June 28 to eliminate $129,000 from a spending bill that would have expanded a Christmas-crafts store in economically depressed Mitchell County.

...Two weeks before the vote, McHenry helped tie up the House for more than three days by criticizing the secrecy of special projects other House members wanted. He said he wanted to “hold the Democrats accountable for their slush fund, their secret earmarks and their pork-barrel projects.”

McHenry insisted that he was not fighting earmarked projects but the secrecy. The Democratic leadership did not want to disclose the earmarks until just before a final vote.

“I fought against keeping earmarks secret,” McHenry said in an interview. “I’m proud to say we won that battle.”

...In 2003, the Mitchell County Development Foundation started the Home of the Perfect Christmas Tree in Spruce Pine with money from the federal Appalachian Regional Commission and private investors. McHenry said he should have requested the earmark for the foundation, an
economic-development organization, instead of the Home of the Perfect Christmas Tree.

But he defended spending federal money to help a local economy devastated by international trade. Over the last five years, the county has lost a third of its manufacturing jobs to overseas furniture and textile competition.

The craft center’s name came from a popular children’s book, The Year of the Perfect Christmas Tree by Gloria Houston.

Last Christmas, first lady Laura Bush picked the store’s hand-blown ornaments and Carolina Snowflake woven-reed ornaments for two White House Christmas trees. She lauded the people of Spruce Pine for working together “to figure out a new industry for themselves.”

You will find an earlier post of mine on McHenry's tough relationship with the other side of the aisle and earmarks a few weeks ago. That post is here.

Green Energy Contentious in NC Mountains

Does anyone remember the "windmills" (high profile, neat-looking, slender blade contraptions) going into Boone years ago? I thought they looked good and the wave of the future. They are gone now but I hope they come back. I personally would rather see clean wind power and solar panels rather than substations and supplemental generators in my view.

News on green energy disputes in the Winston-Salem Journal in a couple of recent stories. First, here's a bit of "Mountain Counties Show Resistance to Green Energy":

The mountain counties of Northwest North Carolina would probably generate a large part of the state’s renewable energy.

But residents in Ashe and Wilkes counties have already shown this year that reaching the proposed green-energy goals won’t come easily.

A proposal to build a wind farm on a ridge in Ashe County set off a storm of protest this year, with opponents saying that the giant turbines would ruin sweeping mountain vistas, killing tourism and housing markets. And a proposal to build a poultry-litter plant in a northwest county - Wilkes, Surry or Alexander - faces opposition.

It has the support of farmers, who want an alternative to spreading manure and bedding on fields, but environmentalists say that burning the litter would produce too much air pollution.

...Public outrage over Sugar Top, an Avery County resort on top of a mountain, led to the 1983 passage of North Carolina’s Ridge Law, which protects certain ridges from tall structures.

Among other issues, the Utilities Commission is looking at whether the ridge law bans large-scale wind turbines. Last month, Blowing Rock became the first local government to ban windmills. Town leaders said they support renewable energy but want to protect views and the town’s tourist-based economy.

Worth reading the article and also a partial update on the status is here in "Ashe Commissioners Adopt Wind-Energy Ordinance":

The Ashe County Board of Commissioners adopted a wind-energy ordinance yesterday that limits wind-turbine heights to 199 feet as measured to the tip of the turbine’s blade.

The new rules replace those that commissioners adopted in February as they hurried to get county-wide regulations in place before the first N.C. Utilities Commission hearing on a proposed commercial wind farm of 25 to 28 turbines in Creston.

The utilities commission’s hearings are scheduled in August, and the commissioners have been reviewing the ordinance.

The regulations are effective immediately because the commissioners voted unanimously on the matter. Their 5-0 vote followed a short public hearing.

The other major change reduces setback requirements for large wind-turbine systems from 1,700 feet to 1,000 feet from a property line. The change was made on the advice of an attorney hired by the county.He told commissioners that it was important to make the regulations consistent with
other county rules in case the issue is challenged in court.

Despite the reduced setback, about twelve members of a citizens group fighting the wind farm applauded commissioners when the rules were adopted.

Maria Whaley, a spokeswoman for Friends of Ashe County, said she was a little disappointed in the setback change, but she appreciates the process that commissioners have been through. Commissioners visited wind farms in West Virginia and Pennsylvania.She said she is pleased with the new height limits. “That was significant,” she said. “It went from basically unlimited to 199 feet.”

The 199-foot limit means that the turbines will not require aviation warning lights, as they would if a turbine were 200 feet or higher. Opponents of the project had objected to having flashing beacons in the night sky on ridge tops.

I think the height restrictions are reasonable and I hope to see non-obtrusive, fast turning, wind farms providing energy in our mountains. I lived in Wilkes and Ashe counties for some time and sitting here in Mitchell County I wish we had those initiatives and innovations under development here.

[Personal note: I have been away for many days traveling and getting needed things done but am happily back.]

"Blissfully Uneducated"

The always superb Victor Davis Hanson in a piece in America.com, "Blissfully Uneducated," explores the state of higher education in this country and he does not like what he sees:

Americans increasingly cannot seem to answer questions like these adequately because they are blissfully uneducated. They have not acquired a broad knowledge of language, literature, philosophy, and history.


...[T]he aim of traditional education was to prepare a student in two very different ways. First, classes offered information drawn from the ages—the significance of Gettysburg, the characters in a Shakespeare play, or the nature of the subjunctive mood. Integral to this acquisition were key dates, facts, names, and terms by which students, in a focused manner in conversation and
speech, could refer to the broad knowledge that they had gathered.


Second, traditional education taught a method of inductive inquiry. Vocabulary, grammar, syntax, logic, and rhetoric were tools to be used by a student, drawing on an accumulated storehouse of information, to present well-reasoned opinions—the ideology of which was largely irrelevant to
professors and the university.


Sometime in the 1960s—perhaps due to frustration over the Vietnam War, perhaps as a manifestation of the cultural transformations of the age—the university jettisoned the classical approach and adopted the therapeutic.


In the end, education is the ability to make sense of the chaotic present through the prism of the absolute and eternal truths of the ages. But if there are no prisms—no absolutes, no eternals, no truths, no ages past—then the present will appear only as nonsense.

As always read all of Hanson's writing.

NYT: Dems on China "Wrongheaded"

Even the New York Times sees trade wars with China as a "wrongheaded prescription," and "misguided." From an editorial, "Politics and the Yuan", here's the NYT:

Just in time for the presidential campaign, Barack Obama has joined Hillary Clinton on the misguided bandwagon of those seeking to penalize China for manipulating its currency. Last week, the two senators and Democratic candidates signed up as co-sponsors to a punish-China bill that would mandate retaliation against countries that keep their currencies cheap to boost their exports....

Still, the prescription is wrongheaded. There is no guarantee that a rise in the value of the yuan would, on its own, boost American workers’ wages or the economy in any significant way. Many of the things China exports to the United States have not been made in America for a long time. Forcing China to revalue the yuan would likely also lead to higher prices for goods in the United States and to a rise in interest rates if China decides to stop buying American Treasury bonds.

And it will complicate the management of a long list of nonfinancial issues the two nations urgently need to address....

Starting a trade war is not likely to change Beijing’s mind. And it will make it harder to persuade and pressure China to become a more responsible exporter and a more responsible international player.

So make a note, I agree with the New York Times on this issue.

Protectionism US Recession Trigger?

Let me help put 2 + 2 together for us all here. Why am I harping on protectionism and China in particular? To answer the question some context is required.

First let's look at some positive economic numbers along with what Wall Street fears in terms of a significant downturn scanario. From the Capital Commerce blog by James Pethotoukis, "Economy Booming, So What Might Start the Next Recession?" where we find:

More good news came from the June income numbers: Real wages for workers—not managers—increased by 3.9 percent, year over year. Deflate by the core May inflation rate of 2.3 percent—the latest numbers available—and you get real wage growth of 1.6 percent. Not too shabby. Right now, Wall Street recession expectations are pretty low. "The threat of recession has abated, as job and income gains provide the wherewithal to support consumer spending," is the analysis of former Federal Reserve governor Lyle Gramley. In fact, the Big Money Crowd is more worried about China than U.S. housing as a source of future trouble. Case in point: this missive "What Would the Next Recession Look Like" that Goldman Sachs just sent me:


"So, what constitutes a recession in modern times, and when do they occur?...We suspect it would almost certainly involve a major economic slowdown in China. On almost any criteria (and topic), it is impossible to underestimate China's positive impact on the buoyancy of world growth this decade. That said, ourproprietary indicators show no sign of an imminent slowdown. In addition, our various proprietary indices suggest that the underlying global macro environment remains favorable...Moreover, if we and the consensus are correct, then the period 2003-2008 will have been one of the most powerful periods of economic growth globally since accurate data has been collectable for much of the world."

So if a slowdown in China is our biggest economic pitfall, then why on God's green earth would anyone want to start a trade war with China that would nehatively impact our relationship with China, the Chinese economy, and hence our economy? Ask the Democratic leadership in Congress, some pandering fear-mongering Republicans, and the Lou Dobbs of the world for an answer.

NC Senate 2008

From Bob Novak's column today:

Sen. Elizabeth Dole of North Carolina, viewed as one of the most vulnerable incumbent Republican senators seeking re-election in 2008, has made a comeback with successful fund-raising and a boost in approval ratings.Dole's private polls put her favorability level at 59 percent, compared with President Bush's 42 percent.

Republican insiders attribute that mostly to her opposing the immigration bill backed by Bush. Thanks to effective second quarter fund-raising (at a level not yet announced), Dole is sitting on an estimated $2 million. She previously had been criticized as an ineffective first-term senator, mainly because of her national chairmanship of the failed 2006 Senate campaign.

Gov. Michael Easley, the strongest potential Democratic challenger so far, has resisted pleas that he run. Dole's war chest may discourage lesser-known Democrats. But State Rep. Grier Martin, an Iraq war veteran, has family money for a possible candidacy.

Movement to Protectionism Continued

The last post on protectionism featured the movement in the US Senate against free trade. The US House is doing the same thing. In today's Washington Post, hardly a bastion of right-wing thinking, is a featured editorial, "Same Old Protectionism: House Democrats Put Up Roadblocks to a Balanced Approach to Free Trade":

TRYING TO salvage an American trade policy, the Bush administration took the unusual step of embracing bipartisanship. Unfortunately, the overture hasn't been reciprocated.

In May, the administration accepted Democratic demands for tougher labor and environmental standards in return for Democratic approval of free-trade agreements with Peru and Panama -- and the possibility of more. "Today marks a new day in trade policy," House Speaker Nancy Pelosi (D-Calif.) said. But last week, the speaker, along with House Majority Leader Steny H. Hoyer (D-Md.), Ways and Means Committee Chairman Charles B. Rangel (D-N.Y.) and Ways and Means trade subcommittee Chairman Sander M. Levin (D-Mich.), dashed those hopes. There will be no more "fast-track" authority for the administration to negotiate trade deals, they declared, until that glorious day when we "expand the benefits of globalization to all Americans." The Panama and Peru deals may still sneak through, although Mr. Rangel will be going to Lima and Panama City soon to discuss how those sovereign nations can change their laws to suit the U.S. Congress. Much bigger proposed agreements with Colombia and South Korea are dead, the Democrats say....

It would be nice if South Korea and other trading partners accepted every item on every U.S. industry's wish list. But that is not the nature of trade negotiations. In the real world, officials must weigh the costs and benefits to the country as a whole -- not to mention the legitimate interests of the other side. One union and the two smaller U.S. automakers should not be allowed to sink a deal that would improve relations with a strategic ally in Northeast Asia and deliver real gains to U.S. agriculture and industry -- not to mention American consumers. The Democrats' partisan embrace of rationalizations served up by labor and (part of) the auto lobby is not "a new day in trade policy." It's protectionism as usual.

Saturday's editorial in Investor's Business Daily is even more clear with "Congress Holds Columbia Hostage":

Congressional Democrats justify scrapping a U.S. trade pact with our best ally in the hemisphere on vague claims its government violates human rights. Last week, Colombia's people saw a different enemy.

It was couched in syrupy language, but it was as bad a blow to Colombia as any dealt by its enemies. The U.S. House Committee on Ways and Means, in a statement by Democrats Nancy Pelosi, Charles Rangel and Sander Levin declared the Democratic Party would deny free trade indefinitely to 46 million Colombians over a few dozen unsolved murders of union activists in the last year.

...Congress was looking for excuses to halt free trade. Why? For the sake of its own union backers, of course, and to curry favor with the leftist think tanks which are enraged about the success of Colombia's popular — and conservative — President Alvaro Uribe.

...[T]he real story of Colombia — [is] a nation struggling against the odds to forge a better future through free trade and democracy. Maybe Democrats ought to start thinking about what they really oppose when they try to paint Colombia as a banana republic and deny it the free trade it's earned.

The ways to kill an economy are not large in number and protectionism by any name is one of the greatest, most dishonest as it can be hidden in the disguise of helping workers and fairness while in reality it is the opposite. Protectionism may help temporarily a few favored industries and a few favored unions at the burden of the consumer, the taxpayer, and the harm done to non-favored industries and those workers. In the long run, everybody loses with protectionist policies.

Democrats Move to Protectionism

More signs of protectionism are blowing in the wind this day. From the New York Sun, "Clinton Signs Gephardt as Key Advisor: Collapse of Support Seen for Free Trade":

Signaling the collapse of support for free trade in the Democratic Party, Senator Clinton's presidential campaign has signed up as an economic adviser a former House leader who staunchly opposed major trade deals, Richard Gephardt of Missouri.

Mrs. Clinton's decision to make Mr. Gephardt an official member of her economic team is a blunt repudiation of her husband's strategy from 1992, when he won the White House in part by distancing himself from unions and protectionist elements in the Democratic base.

"I think there's a large coming together within the Democratic Party in the last few years on the trade issue," Mr. Gephardt told reporters yesterday as he announced his endorsement of Mrs. Clinton and his new role with her campaign. "Senator Clinton has been at the center of that coming together. We've now defined a position that is for trade, that is for free trade treaties, but also requiring that there be a proper observance and a concern about labor and environmental rights in those treaties. We're in a time where there's much more agreement in the party."

While Mr. Gephardt put Mrs. Clinton at "the center" of the Democrats' new approach, the prevailing orthodoxy in the party now is nearly identical to what he was advocating in the 1990s when he led opposition to the North American Free Trade Agreement, which President Clinton championed.

And we read in the Financial Times, "Clinton and Obama Back China Crackdown":

Hillary Clinton and Barack Obama, the frontrunners for the Democratic presidential nomination, have agreed to co-sponsor legislation that would levy punitive duties on Chinese goods to cajole Beijing into revaluing its currency, according to aides.

The endorsement is a sign that trade with China is emerging as a hot political issue in the upcoming ­election and increases the prospect of the legislation passing with a veto-proof majority, analysts said.

A critical stance on US trade policy has become increasingly de rigueur for candidates as the Democratic presidential field tilts towards a populist stance on economic issues.

The bill, introduced by Senators Max Baucus, Chuck Grassley, Charles Schumer and Lindsey ­Graham, would permit US companies to seek anti-dumping duties on Chinese imports based on the undervaluation of the currency and calls for a trade case to be brought by the US at the World Trade Organisation.

Analysts said the sponsorship of the bill by the two leading candidates made it more likely the US would take a more aggressive stance towards Beijing on trade issues if the Democrats took the White House.

In a separate letter sent recently to Hank Paulson, US Treasury secretary, Mr Obama warned that the “administration’s refusal to take strong action against China’s currency manipulation will also make it more difficult to obtain congressional approval” for free trade agreements.

The legislation could be voted on as early as the autumn and has been presented by its advocates as a WTO-compliant version of a more radical bill introduced in the last Congress by Senators Schumer and Graham that would have applied 27.5 per cent tariffs on Chinese goods and violated international trade rules.

Protectionism remains in my list of real concerns in our present environment. The ability of politicians to pander to the fears and hopes of voters in spite of the truth never ceases to amaze me. The theory of comparative advantage, developed late in the 1700's by David Ricardo, a contemporary of Adam Smith, apparently hasn't made its way to the halls of Congress as yet. All we need in the upcoming years is another Smoot-Hawley Act which was one of the major drivers of the Great Depression.

Scholars Speak

Some leading scholars respond to MarketWatch at mid-year 2007, "exactly three quarters of the way through the first decade of the 21st Century," in "At Mid-Year: The Scholars Speak Up" and more than half of the responses were typical nonsense. Here's the worst one and the best one in my opinion. Read them all for some amusement and examples of academics totally cocooned in dream-world.

The worst:

A turn away from acquisitiveness

Barry Schwartz, 60, professor of psychology at Swarthmore College in Pennsylvania and author of the 2004 book "The Paradox of Choice."

Schwartz, who studies the intersection of economics and psychology, bemoans what he perceives as the antisocial, money-hungry turn that U.S. culture has taken over the past several decades.

He believes: "We're living in a society in which people basically think, nobody is going to take care of you but yourself." This drives greed, Schwartz reasons, because people feel the need to acquire more and more resources to protect themselves against disaster.

"We would have a more community-minded outlook if some of our basic needs, like health care, were taken care of," Schwartz says.

He hopes the next decade will mark a turn away from acquisitiveness and bring an increased interest in promoting well-being.

Says he: "I'm hoping to see serious progress made on shifting our focus in terms of policy away from increasing national wealth and towards increasing national welfare. We've been so intent on building wealth that we've neglected all kinds of other things: Health insurance, education, strong community ties, the opportunity to engage in meaningful work -- things that are much more important in terms of well-being than money once you've crossed the subsistence level."

I wonder how he intends to pay for all the health and welfare without any wealth.

The best:

Four ways the developed world can vastly improve human welfare

Bjorn Lomborg, 42, Danish economist, author of the "Cool It," a book on climate change to be published in September by Knopf.

One: "AIDS. It's something we could diminish dramatically by spending a relatively small amount of money. For about $28 billion, we could probably keep 28 million people from dying over the next 4-8 years. For every $1,000 you spend you can actually save a human life."

Two: Malaria. There is a quick and cheap fix, according to Lomborg. The solution? Investing in mosquito nets. "Also, we could do a lot to eliminate malaria by giving people Artemisinin as opposed Chloroquine. It's a slightly more expensive drug, but highly effective."

Four: Free trade. "If you really want to make a difference, make sure that that third world countries can actually participate in the market."

What are we focusing on to our detriment? Climate change, says Lomborg.

"Yes, it's a problem, but it's not one where we can do very much good right now. If the Kyoto Protocol was instituted, it would save only 1,000 people per year over the century. If you invest in research and development, it would be much more likely that our kids would be able to significantly reduce carbon emissions in the future."

The Fourth of July

From today's Wall Street Journal :

Adams wrote Jefferson that the future would "depend on the Union" and asked how that Union was to be preserved. "The Union is still to me an Object of as much Anxiety as ever Independence was," he confided.

He was right to worry. The union has always been difficult, from the first fears that the 13 separate states would behave as competing countries or bickering groups, through a brutal and painful civil war whose wounds have yet to entirely heal, to a vast, modern land whose residents, taking for granted the blessings bestowed upon them, are deeply divided and quick to vilify each other.

More tragically, some seem to enjoy vilifying America, everything it has been and stands for, seeking and finding fatal shortcomings. Adams and Jefferson were not blind to those shortcomings. "We think ourselves possessed or at least we boast that we are so of Liberty of conscience on all subjects and of the right of free inquiry and private judgment, in all cases and yet," Adams admitted, "how far are we from these exalted privileges in fact." Recent moments of real unity after 9/11, when members of Congress stood together on the steps of the Capitol and sang "God Bless America," have been fleeting.

In 1825 Jefferson wrote to congratulate Adams on the election of his son John Quincy to the presidency--an election so close it was decided in the House of Representatives. "So deeply are the principles of order, and of obedience to law impressed on the minds of our citizens generally that I am persuaded there will be as immediate an acquiescence in the will of the majority," Jefferson assured him, "as if Mr. Adams had been the choice of every man." He closed: "Nights of rest to you and days of tranquility are the wishes I tender you with my affect[iona]te respects."

On July 4 the following year, as the nation celebrated the 50th anniversary of the Declaration of Independence, its two frail signers died within hours of each other. Their cause, "struggling for what is most valuable to man, his right of self-government," continues in the nation they launched,
still fraught with aspirations and anxieties, flaws and divisions but, one hopes, with the ability to reconcile as they did, to work together for the joint venture.

I recommend reading all of this piece and the one cited a few days ago from Bill Bennett in my post "The Neglect of US History."

Please take time out this holiday for a few minutes alone to really think about these United States of America, its history, how we are today, and our future.

Google Cars

Finally, a smooth transition from one post to another which happens so rarely; from Honda Jets to Google Cars.

This started as a minor post from a quick blurb in the magazine "eWeek" which I still get in the print edition. I still like hard copy to flip through when I have no destination or purpose in mind unlike browsing where I am always going for something. And there was this:

Google.org is the philanthropic arm of the Google mother ship, with about $1 billion in startup funding from company founders Larry Page and Sergey Brin. One of the first efforts by Google.org—let's just call it Gorg for short—is a hybrid electric car that recharges itself using power produced by solar panels.

If you think of a typical hybrid with an outside plug and extra batteries for using stored electricity as the primary power source, you have the basic idea.

And then there was a reference to the Official Google Blog and "A Clean Energy Update":

Google.org is launching an exciting project that offers a glimpse of a smarter energy future: cars that plug into an electric grid powered by solar energy. Plug-in hybrid electric vehicles (plug-in hybrids”) can achieve 70 -100 miles per gallon, quadrupling the fuel economy of the average car on the road today (~20 mpg). As we demonstrated at today's event, plug-in hybrids can sell power back to the electric grid when it's needed most through vehicle-to-grid (V2G) technology.

As you may know, one of Google.org's core missions is to address climate change. In the U.S., transportation contributes about one-third of all greenhouse gas emissions –- with more than 60 percent of those emissions coming from personal vehicles. By accelerating the adoption of plug-in hybrids and vehicle-to-grid ("V2G") technologies, this new project, RechargeIT.org, aims to reduce emissions and dependence on oil while promoting clean energy technologies and increasing consumer choice. Linking the U.S. transportation system to the electricity grid maximizes the efficiency of our energy system. From these efforts, we believe the environment will benefit -- and consumers will have more choices to fuel their cars.

We've been working with Google engineers and Hymotion/A123Systems to build a small fleet of
plug-in hybrids, adding an external plug and additional batteries to a regular hybrid car so that it runs on electricity with gasoline (or even better, biofuels) to extend the driving range for longer trips.

Since most Americans drive less than 35 miles per day, you easily could drive mostly on electricity with the gas tank as a "safety net." Our goal is to demonstrate the plug-in hybrid and V2G technology, get people excited about having their own plug-in hybrid, and encourage car companies to start building them soon.

In the preliminary results from our test fleet, on average the plug-in hybrid gas mileage was 30+ mpg higher than that of the regular hybrids. In conjunction with Pacific Gas and Electric, we also demonstrated the bidirectional flow of electricity through V2G technology, and have awarded $1
million in grants and announced plans for a $10 million request for proposals (RFP) to fund development, adoption and commercialization of plug-ins, fully electric cars and related vehicle-to-grid (V2G) technology.

For even more details about the entire car project on grant amounts, the companies involved and more, here is the full press release, which is actually interesting.

It strikes me a company, not wedded to old technology and without billions invested in property, old plants, wrong equipment and high cost human capital, and that has tons of cash, can do amazing things.

A Google Car, who could have imagined?

Honda Jets

I would think that this story would make the NC news but no. This is from Canadian Driver, June 28, 2007:

Greensboro, North Carolina - Honda Aircraft Company Inc. has broken ground for its new headquarters and manufacturing facility at Piedmont Triad International Airport in Greensboro, North Carolina. The company will produce the new HondaJet advanced light jet.

Honda will manage the research, development, sales, marketing and manufacturing of the HondaJet at the new facility, which will replace the company's existing hangar and office complex at the airport. The first phase of construction will be completed in spring 2008 and will consist of office space, research facilities and an airplane hangar.

The company plans to begin deliveries of the airplanes to customers in 2010. The total investment is expected to be about US$100 million, including equipment. The company says that its workforce will increase to approximately 350 people once the plant reaches full production, and that about 90 per cent of the plane's component parts will be supplied by companies in Canada and the U.S.

GWOT Just a Bumper Sticker

A political cartoon from IBD's Pulitzer Prize Winner, Michael Ramirez for Monday, July 2, 2007.

The Neglect of US History

Bill Bennett has an important piece out on the tragedy of the twin failure of our schools to teach and our children not possessing the knowledge of the events and people that have shaped these United States. In "Our National Alienation & Amnesia" he makes many good points and recalls a few highlights of some of our great personalities from our past. A portion to get the flavor:

Two years ago, the Pulitzer Prize-winning historian David McCullough told the U.S. Senate that American History was our nation’s worst subject in school...Our children do worse in American history than they do in reading or math. McCullough testified we were facing the prospect of national amnesia, saying, “Amnesia of society is just as detrimental as amnesia for the individual. We are running a terrible risk. Our very freedom depends on education, and we are failing our children in not providing that education.”

McCullough is right, and it is a double tragedy: a) our children no longer know their country’s history and b) the story they do not know is the greatest political story ever told...

In his farewell address to the nation, the large-minded amateur historian President Ronald Reagan warned of what we see in our nation’s report card today, saying “If we forget what we did, we won't know who we are. I'm warning of an eradication of the American memory that could result, ultimately, in an erosion of the American spirit.”

Our history is full of controversy, suffering, struggling, overcoming, and winning. There is no reason to elevate its failings at the expense of its successes, nor is there reason to ignore its failings or, worse, turn it into a snooze-fest....

The great adventurer Bernard DeVoto once wrote to Catherine Drinker Bowen about why her task as a historian was so important:

"If the mad, impossible voyage of Columbus or Cartier or La Salle or Coronado or John Ledyard is not romantic, if the stars did not dance in the sky when our Constitutional Convention met, if Atlantis has any landscape stranger or the other side of the moon any lights or colors or shapes more unearthly than the customary homespun of Lincoln and the morning coat of Jackson, well, I don’t know what is."

Indeed. Our history is all that and more, much more. America was, is, and — we hope — will continue to be the place where, more than anyplace else, dreams actually do come. It is, as Abraham Lincoln described it, “the last best hope of earth.” But to live that dream, to know what hope we convey, and to teach it from generation to generation, we must describe it, appreciate it, and learn to fall in love with it all over again.

Bill Bennett has produced a reminder of what many of us missed unless we struck out on our own to really read our exciting history. This would be a good column to pass along to friends for excellent Fourth of July reading and a reminder of what all of wonderful national holiday really means.

Strategic Difference In Puzzles and Mysteries

In unexpected places we often find unexpected ways of thinking and hence new ways to solve problems. In an article in the Smithsonian, where one usually finds pretty pictures of nature and discussions of historic objects, I found some commentary from the director of the Rand Corporation's Center for Global Risk and Security. I am not sure why this was in the magazine in which it was in but it fit into the magazine's heading of "Presence of Mind." Nevertheless, the author, a Gregory F. Treverton, who sounds like a very proper security analyst indeed, gives us "Risks and Riddles," with a very teasing subheading of "The Soviet Union was a puzzle. Al Qaeda is a mystery. Why we need to know the difference.":

Puzzles can be solved; they have answers.

But a mystery offers no such comfort. It poses a question that has no definitive answer because the answer is contingent; it depends on a future interaction of many factors, known and unknown. A mystery cannot be answered; it can only be framed, by identifying the critical factors and applying some sense of how they have interacted in the past and might interact in the future. A mystery is an attempt to define ambiguities.

Puzzles may be more satisfying, but the world increasingly offers us mysteries. Treating them as puzzles is like trying to solve the unsolvable—an impossible challenge. But approaching them as mysteries may make us more comfortable with the uncertainties of our age....

Puzzle-solving is frustrated by a lack of information. Given Washington's need to find out how many warheads Moscow's missiles carried, the United States billions of dollars on satellites and other data-collection systems. But puzzles are relatively stable. If a critical piece is missing one day, it
usually remains valuable the next.

By contrast, mysteries often grow out of too much information. Until the 9/11 hijackers actually boarded their airplanes, their plan was a mystery, the clues to which were buried in too much "noise"—too many threat scenarios. So warnings from FBI agents in Minneapolis and Phoenix went unexplored. The hijackers were able to hide in plain sight. After the attacks, they became a puzzle: it was easy to pick up their trail.

Solving puzzles is useful for detection. But framing mysteries is necessary for prevention.

For the mysteries of intelligence, measures of effectiveness are elusive. The goal of prevention is...nothing—an absence of attacks. But if no major terrorist attack occurs, does that represent the effectiveness of prevention, simple good luck or the fact that the threat was overstated in the first
place?

That's one uncertainty we'll have to learn to live with. There are others that framing mysteries can help us understand.

The author uses the above to illustrate, besides the difference in the Cold War and 911, the trials and tribulations of medicine to prevent disease, the Enron scandal, and discussions of energy; rightly pointing out that most energy analysis, particularly future oil supply and prices, treats the problem as a puzzle while it too is rightly a mystery, as least as he defines a mystery.

I think this distinction is useful in framing many situations such our discussions of global warming (definitely a mystery), proper public policy on taxes, trade, deficits and even onto how certain of our friends and family may react to given or predictable circumstances.

The entire article is a good, quick read.

SRI and Greenwashing

Socially Responsible Investing is indeed a growing trend as is the environmental movement. In "The Green in Hedge Funds Isn't All About Money" I found a term new to me that describes a phenomenon that I have been suspecting recently - "greenwashing." Here's the idea:

The popularity of the environment and all things "green" has not escaped hedge funds: At least three dozen hedge funds are already applying environmental and social screens to the investment process, with more on the way according to industry reports.

The strategy is to get a piece of the socially responsible investing market, estimated at approximately $2 trillion, according to the Social Investment Forum, specifically the environmental sector, which is growing rapidly.

...hedge funds jumping on board with their specific opportunity lust is sure to buttress more environmental consideration elsewhere in the investment markets, if only for one reason: activity. Hedge funds trade heavily and that activity will surely spawn other investors to seek opportunities in the green sector as well.

This hunt for higher returns, or alpha in investment jargon, may prop up prices even more in environmental stocks, shares of companies that operate in the waste-management or alternative-energy sectors, for example. Activity breeds interest and interest in investing usually brings with it investment dollars. And those dollars usually push up share prices....

"The function of a hedge fund is to create alpha, and anything that gets in the way of that is unwanted," Phillip Goldstein, a manager of Opportunity Partners LP, a hedge fund based in Pleasantville, N.Y., told Investment News. "It sounds like a marketing gimmick, and I don't know that any individuals would invest in something like that."

That marketing gimmick is called "greenwashing" in environmental circles, and it is when a company pays lip service to the environment but doesn't really put into practice anything tangible to back up its environmentally friendly claims.

Home Depot recently offered to include "green" product suppliers in its Eco Options program for customers. Of its 176,000 products, 60,000 product suppliers applied for inclusion. Yet only 2,500 made the official green-label cut. Many were simply rebranding and spinning their existing products "green."

It's the turnout and activity that is interesting. Hedge funds are apparently seeing that too. But they will have to carefully vet their picks to make sure their "green" investments are indeed green and will produce returns of the same color.

So be aware of greenwashing as you will see more and more of the practice in advertising and in investment funds.

Barron's Ranks the Candidates

In the new Barron's, the cover story ranks the leading candidates by party and since the article is titled "The Mitt and Bill Show" guess who won:

Democrat Bill Richardson, the garrulous governor of New Mexico, has bloviated himself from near the front of his party's field to the back. Yet Romney would be the best Republican candidate for stocks, bonds and the economy, and Richardson, hands down, would be the best Democrat.


Those are among the findings of a Barron's analysis of the nine major candidates from the two parties. We based our judgments on the candidates' responses to a detailed questionnaire on taxes, spending, health care, energy and other issues. We also considered their records as governors, senators and holders of other offices. Romney, formerly governor of Massachusetts and once a top private-equity investor, garnered 3.8 points out of a possible 4, edging out Republican rival Rudolph Giuliani, with 3.7. John McCain was third, with 3.5. a On the Democratic side, Richardson scored a 3.0, handily topping the field. Perhaps surprisingly, Barack Obama, finished second, with 2.0. Despite his strong support from the party's traditional base, he displayed more free-market thinking than Hillary Clinton, who scored 1.8. He showed a healthy skepticism for big government in his approaches to both health care and energy....

In arriving at the scores, we consistently favored market-driven points of view.... While our points of view may sound more Republican than Democratic, our guiding principle is the power of markets. We are aware that the stock market often does best with a Democrat in the White House. From the beginning of the 20th century, the Dow Jones industrials have climbed an average of 7.19% a year when Democrats were president, versus 4% under Republicans, according to Ned Davis Research. Bonds, on the other hand, have done better under Republicans.

We don't know if history is set to repeat itself. But right now, the Republicans are clearly exhibiting more market-friendly tendencies.

The article seems to go out of the way to be fair and explores the big topics in some depth for each candidate. It really is interesting enough to deserve a full read.

Note & HT: MarketWatch provided the free link to the Barron's story.And MarketWatch remains my favorite source for financial news and I keep it up whenever I'm online. I even liked when it was CBS MarketWatch but it is even better as a Dow Jones product.