I've been thinking a lot over the past few days about what to intelligently write about with the government shutdown, and how to succinctly express my views.
No need. Jon Stewart has done it excellently. Please watch the following 7 minutes:
Don't forget -- Jon Stewart and Stephen Colbert led the "March to Restore Sanity"-- and thousands of people showed up on the national mall to support their middle ground approach. Where has that ethos gone?
Showing posts with label economy. Show all posts
Showing posts with label economy. Show all posts
Wednesday, October 2, 2013
Tuesday, February 7, 2012
A Roadmap for America
In his State of the Union Address, President Obama made reference to getting manufacturing back in America. In fact, he explicitly said that "this blueprint begins with American manufacturing."
That made me squirm. This post is to describe why I think all of America should squirm, and what we should do instead.
The Problem
I squirmed because it strikes me as a wistful desire to return to a bygone era, one that has passed us on and we need to embrace the new change. We've been through this before, with housing prices:
In the 2009-2010 era, I distinctly remember politicians saying "we have got to restore housing prices! Get them back up to where they used to be!" (Sadly, a Google News search couldn't bring up any direct quotes.) But the ugly truth was that housing prices were a bubble, and prices were not going to go back up. For the housing market, it was a great ride up from 2003 to 2007, and we've been "taking our medicine" ever since.
I feel similarly, although not identically, towards manufacturing. There has been a fervor recently over how iPhones and solar cells are manufactured in China and not in the US. Why is that?
First of all, the Chinese are willing to work in conditions that would not be tolerated in the US today. This is described eloquently in the famous piece done a few weeks ago by This American Life.
Secondly, they're willing to do it for far less than minimum wage. Shenzhen has the highest minimum wage of any city, at about $207 per month.
Third, the Chinese government is backing production in a big, big way:
Admittedly, the electronics industry has the worst labor practices of any industry, but it's telling of how far the "other guys" are willing to go. When President Obama asked Steve Jobs about why Apple can't make iPhones in the US, Steve replied, "Those jobs aren't coming back."
He's absolutely right. Manufacturing in China is a step or three below what manufacturing was like in Pittsburgh in the early 20th century:
I openly admit -- and heartily welcome -- the fact that Chinese wages are rising (21% last year alone). I hope that someday in the near future the Chinese worker will have parity with a laborer in the western world. But that does not mean that the manufacture of iPhones, or most other commodities, will move back to the US. Instead, they will move to southeast Asia ... or possibly Africa ... wherever the cheapest labor in the world can be found.
The Solution
So, what do we do instead? America should strive to be an innovator, and stick to the high technology, high capital investment stuff, where the employee has to be smart, skilled, and resourceful.
Here's one example: a government sponsored, nationwide wireless network. I have no idea how legal this would be, and here's where I need help.
In the 1950's, then-President Eisenhower embarked upon the Eisenhower Interstate System: a network of high-speed roads that would connect the US and allow commerce to flow freely and quickly. It immodestly touts itself as "The Greatest Public Works Project in History." The cost in 1991 was estimated to be $128.9 billion (starting in 1956), but wow has it enabled growth in this country.
Why not do something similar for the wireless / networked world? Roll out a "wireless highway" that anyone can get on to, with bandwidth limits (the 21st century equivalent of speed limits) so that all may partake?
I see two hard parts:
This would be innovative. It would require a large cadre of network engineers to design, deploy, and maintain. It would train the next generation of electrical engineers, electricians, construction crews, phone developers, and computer makers to take advantage of our "wireless highway system." And it might unleash a whole new division of commerce (well, actually, just continue to boost the industry we already have) to take advantage of this new highway system.
That, and examples like it, are my idea of a blueprint for America.
That made me squirm. This post is to describe why I think all of America should squirm, and what we should do instead.
The Problem
I squirmed because it strikes me as a wistful desire to return to a bygone era, one that has passed us on and we need to embrace the new change. We've been through this before, with housing prices:
I feel similarly, although not identically, towards manufacturing. There has been a fervor recently over how iPhones and solar cells are manufactured in China and not in the US. Why is that?
First of all, the Chinese are willing to work in conditions that would not be tolerated in the US today. This is described eloquently in the famous piece done a few weeks ago by This American Life.
Secondly, they're willing to do it for far less than minimum wage. Shenzhen has the highest minimum wage of any city, at about $207 per month.
Third, the Chinese government is backing production in a big, big way:
- They built their own production factory, at government expense, anticipating the next order from Apple.
- China has outlayed almost $800 billion for its solar cell manufacturing from 2011 - 2020. Compare that to the outcry over Solyndra going under, at a cost of about $500 million.
Admittedly, the electronics industry has the worst labor practices of any industry, but it's telling of how far the "other guys" are willing to go. When President Obama asked Steve Jobs about why Apple can't make iPhones in the US, Steve replied, "Those jobs aren't coming back."
He's absolutely right. Manufacturing in China is a step or three below what manufacturing was like in Pittsburgh in the early 20th century:
I openly admit -- and heartily welcome -- the fact that Chinese wages are rising (21% last year alone). I hope that someday in the near future the Chinese worker will have parity with a laborer in the western world. But that does not mean that the manufacture of iPhones, or most other commodities, will move back to the US. Instead, they will move to southeast Asia ... or possibly Africa ... wherever the cheapest labor in the world can be found.
The Solution
So, what do we do instead? America should strive to be an innovator, and stick to the high technology, high capital investment stuff, where the employee has to be smart, skilled, and resourceful.
Here's one example: a government sponsored, nationwide wireless network. I have no idea how legal this would be, and here's where I need help.
In the 1950's, then-President Eisenhower embarked upon the Eisenhower Interstate System: a network of high-speed roads that would connect the US and allow commerce to flow freely and quickly. It immodestly touts itself as "The Greatest Public Works Project in History." The cost in 1991 was estimated to be $128.9 billion (starting in 1956), but wow has it enabled growth in this country.
Why not do something similar for the wireless / networked world? Roll out a "wireless highway" that anyone can get on to, with bandwidth limits (the 21st century equivalent of speed limits) so that all may partake?
I see two hard parts:
- Making it forward compatible. Unlike today's LTE / WiMax / 4G battles, the US network would ideally be upgradeable as technology advances. The US government has tons of frequencies available for its, so more headroom exists for it to grow than exists in private industry. I'm not an actual network engineer, but I'm willing to bet this isn't easy.
- Making Verizon, AT&T, Sprint, and T-Mobile happy. There are laws prohibiting the government from competing with private industry. And those 4 mobile carriers (and many other, non-national carriers) have spent billions of their own nickels in developing and deploying their own super-fast wireless networks. But maybe if the government makes the frequencies available to all, then it wouldn't really be competing? After all, the US Postal Service, FedEx, and UPS all seem to get along okay, right?
This would be innovative. It would require a large cadre of network engineers to design, deploy, and maintain. It would train the next generation of electrical engineers, electricians, construction crews, phone developers, and computer makers to take advantage of our "wireless highway system." And it might unleash a whole new division of commerce (well, actually, just continue to boost the industry we already have) to take advantage of this new highway system.
That, and examples like it, are my idea of a blueprint for America.
Saturday, January 28, 2012
Moon Bases and Other Baloney
The political grandstanding -- and pandering to potential voters -- is in full swing, and it absolutely drives me up the wall.
The most recent blood-boiling incident is Newt Gingrich's promise to Florida voters that he would have a moon base established by the end of his second term, or 2021. Mr. Gingrich is either lying through his teeth in a shameless pitch to grab the votes of the hopelessly uneducated, or is mind-numbingly ignorant about the difficulties of what he is proposing. In either case, such a gross mis-representation of what a President can (and cannot do) in today's society puts him in the same league as Michelle Bachmann, who promised back in August that if she were President, she would make gasoline $2 per gallon.
Wrong, wrong, and wrong. When politicians put forth abject lies like that, in my opinion it should disqualify them for being President.
Colleagues of mine look at me funny when I rant about this. They say, "They're politicians; that's what they do. They lie." I'm reminded of an old adage from a former job: What do valves do? They leak. (You normally think of a valve stopping flow in a pipe, but in real-world applications, they leak. And sometimes on purpose.)
I guess it's the naive schoolboy in me still poking through, wistfully hoping that our vaunted politicians would have the highest ethics and the highest moral standards as they pursue these powerful and important positions governing the United States. Alas, human nature comes through and shows that people will be as slimy as they can to garner votes, and are willing to say whatever they need to say. Perhaps the ends justify the means, in their minds.
The truth is, to build a base on the moon requires a heavy-lift human-rated rocket, which the United States does not begin to have. As I have posted previously, a GAO Report stated that the now-defunct Constellation program would have cost $97 billion to complete, through 2020 (and this was back in 2009). And the $97 billion doesn't begin to cover the costs of the actual lunar base. If I had to estimate, a lunar base would be at least half as hard as building the International Space Station -- which had an all-in cost of about $100 billion. NASA's budget in 2012 is almost $18 billion -- which includes a lot of staffing and a whole host of ongoing missions. The Augustine Report from 2009 recognized early on that the grandiose plans people had from NASA were not going to happen without a major retooling.
Look, as an engineer, I would like nothing more than to have a high profile, shoot-for-the-moon project like this country had with Apollo. It would be so inspiring, it would have so many offshoot benefits, it would motivate a whole new generation of scientists and engineers ... but it is flat-out not going to happen in today's economic times. I believe it is irresponsible to be considering those types of projects when our financial debt has now exceeded 100% of our annual GDP. We have got to get our own house in order first before doing these grand science projects.
I sincerely hope the people of Florida are smart enough to see through these ridiculous promises.
The most recent blood-boiling incident is Newt Gingrich's promise to Florida voters that he would have a moon base established by the end of his second term, or 2021. Mr. Gingrich is either lying through his teeth in a shameless pitch to grab the votes of the hopelessly uneducated, or is mind-numbingly ignorant about the difficulties of what he is proposing. In either case, such a gross mis-representation of what a President can (and cannot do) in today's society puts him in the same league as Michelle Bachmann, who promised back in August that if she were President, she would make gasoline $2 per gallon.
Wrong, wrong, and wrong. When politicians put forth abject lies like that, in my opinion it should disqualify them for being President.
Colleagues of mine look at me funny when I rant about this. They say, "They're politicians; that's what they do. They lie." I'm reminded of an old adage from a former job: What do valves do? They leak. (You normally think of a valve stopping flow in a pipe, but in real-world applications, they leak. And sometimes on purpose.)
I guess it's the naive schoolboy in me still poking through, wistfully hoping that our vaunted politicians would have the highest ethics and the highest moral standards as they pursue these powerful and important positions governing the United States. Alas, human nature comes through and shows that people will be as slimy as they can to garner votes, and are willing to say whatever they need to say. Perhaps the ends justify the means, in their minds.
The truth is, to build a base on the moon requires a heavy-lift human-rated rocket, which the United States does not begin to have. As I have posted previously, a GAO Report stated that the now-defunct Constellation program would have cost $97 billion to complete, through 2020 (and this was back in 2009). And the $97 billion doesn't begin to cover the costs of the actual lunar base. If I had to estimate, a lunar base would be at least half as hard as building the International Space Station -- which had an all-in cost of about $100 billion. NASA's budget in 2012 is almost $18 billion -- which includes a lot of staffing and a whole host of ongoing missions. The Augustine Report from 2009 recognized early on that the grandiose plans people had from NASA were not going to happen without a major retooling.
Look, as an engineer, I would like nothing more than to have a high profile, shoot-for-the-moon project like this country had with Apollo. It would be so inspiring, it would have so many offshoot benefits, it would motivate a whole new generation of scientists and engineers ... but it is flat-out not going to happen in today's economic times. I believe it is irresponsible to be considering those types of projects when our financial debt has now exceeded 100% of our annual GDP. We have got to get our own house in order first before doing these grand science projects.
I sincerely hope the people of Florida are smart enough to see through these ridiculous promises.
Thursday, September 22, 2011
The Loan Guarantee Program Gets a Bad Rap
I've been planning this post for months, but the recent Solyndra press (and the negativity that it's bringing on the whole program) has spurred me into getting off my duff and actually writing about it.
Initially, the government gave a $535 million loan guarantee to a company called Solyndra, which needed additional funding to help start up its innovative new way of making solar panels. The term "guarantee" is important here, because the government is just providing a guarantee -- it's not actually loaning out any money.
So, on the face of things, the Loan Guarantee Program is a great program:
The federal government isn't on the hook for any money unless the company defaults and goes bankrupt. And -- even if the company does go belly up -- the government usually secures the right to be "first in line" for grabbing any leftover assets that the company may have had. So, if the unthinkable does happen, at least the government can go in, collect all the inventory, and hopefully auction it off and salvage some of the money.
Initially, the reports on the Solyndra case were very negative. "OMG!!" they reported. "A government funded program went bankrupt!!"
This really upset me. The whole purpose of the loan guarantee program is to promote risky, high tech industries that can't get funding elsewhere. From the 2005 Energy Act language that started the whole program:
But then things got juicy, when it appeared there may have been a connection between Solyndra, one of its financiers, and the Obama Administration. And then the Solyndra executives are going to plead the 5th amendment when they have to testify? Yeesh.
It also appeared that, back in May or so, the government re-structured the loan guarantee so that it no longer had first-rights to the assets in case Solyndra went belly up. Giving up these first rights was apparently a last-ditch effort to raise more funding for Solyndra.
So, who is to blame for all of this? Did the Obama administration really reach in with its Noodly Appendage and skew the loan towards benefitting one of the administration's donors? Perhaps. But there's an easy way to figure this out, and satisfy everyone:
For every loan that is granted (and for those that are not), the Loan Program Office brings in an independent engineering firm to review the project from top to bottom, soup to nuts. The Independent Engineer writes a (sometimes exhaustive) review to characterize the risks and the likelihood of success. It should be readily apparent from this review (along with any follow up reviews that may have been done) whether the Solyndra business venture was really viable or not.
The fact that it hasn't been released is somewhat concerning to me ... I have a suspicion that if that independent review was a glowing one, then it would have already been released.
Taking a Step Back
I decided to take a step back, and thought, "What else has the Loan Program Office been up to, and what investments tend to have the biggest payoff for the taxpayer?"
Conveniently, the Loan Program Office lists all of its projects funded to date, the amount of the loan guarantee, and some other stats about the project. Most notably for me, the total expected number of megawatt-hours (MW-hr) each project is supposed to produce, annually.
In layman's terms, the annual MW-hr figure is the amount of JUICE the plant can crank out per year. So, which projects crank out the most juice for the lowest investment cost? I copied the data as published on the DOE site, and compiled it into a table.
Wow. Geothermal is cheap. I was surprised at that. Right after that is nuclear, which I was pleasantly surprised to see. And solar, no matter how you slice it, is still pricey. Wind is somewhere in the middle.
I was, however, encouraged to see that the rooftop solar project (putting solar panels on rooftops, and in this case at military installations) was the most affordable of the solar bunch. Personally, I have always liked that idea -- we're not using our rooftops for anything else, so we might as well stick some solar panels up there and use the energy productively.
If I had more time, I would color-code the bars based on what technology each one is, but it's getting late and this post is getting long. Please support your local engineer. :)
Initially, the government gave a $535 million loan guarantee to a company called Solyndra, which needed additional funding to help start up its innovative new way of making solar panels. The term "guarantee" is important here, because the government is just providing a guarantee -- it's not actually loaning out any money.
So, on the face of things, the Loan Guarantee Program is a great program:
- It doesn't cost the taxpayers any money up front,
- It has the potential for making money through the credit subsidy cost that the government charges in return for the loan guarantee,
- It supports innovative, new technologies for making electricity, and
- It creates jobs.
The federal government isn't on the hook for any money unless the company defaults and goes bankrupt. And -- even if the company does go belly up -- the government usually secures the right to be "first in line" for grabbing any leftover assets that the company may have had. So, if the unthinkable does happen, at least the government can go in, collect all the inventory, and hopefully auction it off and salvage some of the money.
Initially, the reports on the Solyndra case were very negative. "OMG!!" they reported. "A government funded program went bankrupt!!"
This really upset me. The whole purpose of the loan guarantee program is to promote risky, high tech industries that can't get funding elsewhere. From the 2005 Energy Act language that started the whole program:
Section 1703 of Title XVII of the Energy Policy Act of 2005 authorizes the U.S. Department of Energy to support innovative clean energy technologies that are typically unable to obtain conventional private financing due to high technology risks. [Emphasis added]No matter how you slice it, higher risk == higher potential of failure. At first, I thought people were unwilling to accept this.
But then things got juicy, when it appeared there may have been a connection between Solyndra, one of its financiers, and the Obama Administration. And then the Solyndra executives are going to plead the 5th amendment when they have to testify? Yeesh.
It also appeared that, back in May or so, the government re-structured the loan guarantee so that it no longer had first-rights to the assets in case Solyndra went belly up. Giving up these first rights was apparently a last-ditch effort to raise more funding for Solyndra.
So, who is to blame for all of this? Did the Obama administration really reach in with its Noodly Appendage and skew the loan towards benefitting one of the administration's donors? Perhaps. But there's an easy way to figure this out, and satisfy everyone:
MAKE PUBLIC THE INDEPENDENT ENGINEER'S REVIEW.
For every loan that is granted (and for those that are not), the Loan Program Office brings in an independent engineering firm to review the project from top to bottom, soup to nuts. The Independent Engineer writes a (sometimes exhaustive) review to characterize the risks and the likelihood of success. It should be readily apparent from this review (along with any follow up reviews that may have been done) whether the Solyndra business venture was really viable or not.
The fact that it hasn't been released is somewhat concerning to me ... I have a suspicion that if that independent review was a glowing one, then it would have already been released.
Taking a Step Back
I decided to take a step back, and thought, "What else has the Loan Program Office been up to, and what investments tend to have the biggest payoff for the taxpayer?"
Conveniently, the Loan Program Office lists all of its projects funded to date, the amount of the loan guarantee, and some other stats about the project. Most notably for me, the total expected number of megawatt-hours (MW-hr) each project is supposed to produce, annually.
In layman's terms, the annual MW-hr figure is the amount of JUICE the plant can crank out per year. So, which projects crank out the most juice for the lowest investment cost? I copied the data as published on the DOE site, and compiled it into a table.
Wow. Geothermal is cheap. I was surprised at that. Right after that is nuclear, which I was pleasantly surprised to see. And solar, no matter how you slice it, is still pricey. Wind is somewhere in the middle.
I was, however, encouraged to see that the rooftop solar project (putting solar panels on rooftops, and in this case at military installations) was the most affordable of the solar bunch. Personally, I have always liked that idea -- we're not using our rooftops for anything else, so we might as well stick some solar panels up there and use the energy productively.
Friday, January 21, 2011
The Continuing Resolution
The Continuing Resolution (CR) that our government is currently under is really, really hurting the country, and it's not getting enough coverage in the news.
While an under-reported piece of news like the CR is not new or noteworthy, I think it's worth some rational discussion when Congress is actively wasting time making symbolic statements and political posturing about Obamacare. The act was provocatively named "Repealing The Job-Killing Health Care Act" and reviewed by the Congressional Budget Office. It has a very, very small chance of being passed by the Senate and zero chance of being signed by the President (he said as much in a press release).
I freely admit that there may be room for improvement in Obamacare. For example, I never quite grasped how forcing health care companies to accept nearly all applicants won't cause rates to rise dramatically. I do, however, applaud the idea of making almost all preventive medicine covered. And I'm actually supportive of requiring people to get health care -- an ounce of prevention is worth a pound of cure.
But, whatever. The point of this post is not to debate the merits of Obamacare. It's to lament the dog-and-pony show that the House is putting on with this Act (they spent three days debating the bill) when there are far, far more pressing and important issues to be dealt with. Namely, THE BUDGET.
Passing a budget is perhaps the single most important thing that Congress can do each year. And they missed it badly for FY2011. See, in the normal budget cycle, there are 12 bills that are individually passed (one bill from each of the twelve subcommittees of the House Committee on Appropriations) and then signed by the President. Often, things don't go swimmingly, and they have to roll some or all of them together in an "omnibus spending bill". In fact, that usually happens. From 1997 through 2007, there were only 3 years (Table 1) where at least one bill wasn't combined with another to form some kind of omnibus bill. And in 1987 and 1988, ALL subcommittee bills were combined into one, whopping document.
And then, there are other years where Congress really doesn't get its act together and doesn't pass a spending bill by October 1st. In fact, the Congressional Research Service states the following (page 13):
So what happens when they don't pass a budget? Then you're in the dreaded realm of the Continuing Resolution:
This wreaks havoc on anyone trying to plan their program. We are now ~ 4 months into FY2011, and no one has a budget. As a government program manager, chances are, you can't build. You can't expand. You can't grow. And for a country that's trying to reduce its 9.8% unemployment rate, that's a big deal.
And yet Congress (well, at least the House) prances about, passing an irrelevant bill that will never be signed. "Re-arranging the deck chairs on the Titanic" doesn't cut it -- at least people USE deck chairs occasionally. This is like handing out maps of Cincinnati on the Titanic.
There is a perfect storm brewing:
But what I'm afraid will happen is that Congress will keep kicking the can down the road: do a stop-gap increase in the debt ceiling, and make ALL of FY2011 a Continuing Resolution ... resulting in a null year that could have accomplished so much, and at a time when so much was needed. Alas.
While an under-reported piece of news like the CR is not new or noteworthy, I think it's worth some rational discussion when Congress is actively wasting time making symbolic statements and political posturing about Obamacare. The act was provocatively named "Repealing The Job-Killing Health Care Act" and reviewed by the Congressional Budget Office. It has a very, very small chance of being passed by the Senate and zero chance of being signed by the President (he said as much in a press release).
I freely admit that there may be room for improvement in Obamacare. For example, I never quite grasped how forcing health care companies to accept nearly all applicants won't cause rates to rise dramatically. I do, however, applaud the idea of making almost all preventive medicine covered. And I'm actually supportive of requiring people to get health care -- an ounce of prevention is worth a pound of cure.
But, whatever. The point of this post is not to debate the merits of Obamacare. It's to lament the dog-and-pony show that the House is putting on with this Act (they spent three days debating the bill) when there are far, far more pressing and important issues to be dealt with. Namely, THE BUDGET.
Do your job, Congress.
Passing a budget is perhaps the single most important thing that Congress can do each year. And they missed it badly for FY2011. See, in the normal budget cycle, there are 12 bills that are individually passed (one bill from each of the twelve subcommittees of the House Committee on Appropriations) and then signed by the President. Often, things don't go swimmingly, and they have to roll some or all of them together in an "omnibus spending bill". In fact, that usually happens. From 1997 through 2007, there were only 3 years (Table 1) where at least one bill wasn't combined with another to form some kind of omnibus bill. And in 1987 and 1988, ALL subcommittee bills were combined into one, whopping document.
And then, there are other years where Congress really doesn't get its act together and doesn't pass a spending bill by October 1st. In fact, the Congressional Research Service states the following (page 13):
In 26 of the past 31 years (FY1977-FY2007), Congress and the President did not complete action on a majority of the regular bills by the start of the fiscal year. In eight years, they did not finish any of the bills by the deadline. They completed action on all the bills on schedule only four times: FY1977, FY1989, FY1995, and FY1997.
So what happens when they don't pass a budget? Then you're in the dreaded realm of the Continuing Resolution:
- Each month, you're only allowed to spend 1/12th of last year's budget;
- No new contracts can be awarded or new projects started;
- When the Continuing Resolution ends, you must spend whatever new money you receive in a shorter period of time to not have excessive carry-over in the next year.
This wreaks havoc on anyone trying to plan their program. We are now ~ 4 months into FY2011, and no one has a budget. As a government program manager, chances are, you can't build. You can't expand. You can't grow. And for a country that's trying to reduce its 9.8% unemployment rate, that's a big deal.
And yet Congress (well, at least the House) prances about, passing an irrelevant bill that will never be signed. "Re-arranging the deck chairs on the Titanic" doesn't cut it -- at least people USE deck chairs occasionally. This is like handing out maps of Cincinnati on the Titanic.
There is a perfect storm brewing:
- Congress was unable to come to an agreed-upon spending bill (twice) in December, and they have now pushed the Continuing Resolution until March 4th. And, by the way, the House is in session for 9 days in February and only 3 days in March before that deadline hits. That leaves very little time to negotiate and debate a fix to this problem.
- The Treasury Department estimates that we'll hit the current debt limit ceiling of $14.3 trillion sometime between March 31 and May 16.
- The GOP has told the White House that they're not likely to raise the debt ceiling.
But what I'm afraid will happen is that Congress will keep kicking the can down the road: do a stop-gap increase in the debt ceiling, and make ALL of FY2011 a Continuing Resolution ... resulting in a null year that could have accomplished so much, and at a time when so much was needed. Alas.
Monday, November 22, 2010
Yucca Mountain Spotted Fever #3
One last follow-up to this whole Yucca Mountain / NRC / ASLB thing ...
I never did get a response back directly from Senator Inhofe, which isn't surprising. A senator unlikely to respond to every Tom, Dick, and Harry who emails him or her, even if s/he does have a large staff. I (naively?) hope they have better things to do, even if my e-mail was particularly well crafted.
But all is not lost: the NRC did take a vote, and the votes have become public. In an effort to just get on with it, I'm just going to point you to this site, which has all the gory details, and continues to track the issue a lot closer than I will:
Nuclear Townhall
This whole issue would be more amusing if there weren't tens of billions of dollars at stake.
I never did get a response back directly from Senator Inhofe, which isn't surprising. A senator unlikely to respond to every Tom, Dick, and Harry who emails him or her, even if s/he does have a large staff. I (naively?) hope they have better things to do, even if my e-mail was particularly well crafted.
But all is not lost: the NRC did take a vote, and the votes have become public. In an effort to just get on with it, I'm just going to point you to this site, which has all the gory details, and continues to track the issue a lot closer than I will:
Nuclear Townhall
This whole issue would be more amusing if there weren't tens of billions of dollars at stake.
Saturday, October 23, 2010
When your only tool's a hammer ...
... all the world looks like a nail.
The above quote is attributed to Abraham Maslow, and it rings true time and time again. In this particular case, I think it applies to The Federal Reserve.
News flash for those who have been living under a rock: housing prices have NOT been rising indefinitely (as many investment products were designed to take advantage of), and when this pyramid scheme began to unravel (I love mixed metaphors), a ton of things happened very rapidly. Credit markets dried up; countless business plans that were based on aggressive growth failed; countless more projects dried up or did not get funded in the first place, and unemployment shot up above 10%. The Fed pulled the biggest lever it could, and dropped its lending interest rates like a rock:
Source: http://www.tradingeconomics.com/Economics/Interest-Rate.aspx?Symbol=USD
Look again. The interest rate has been almost ZERO since January 2009. Twenty months and counting. Historically, it's usually around 5%, but was as high as 20% in March 1980. Banks and other major financial institutions can borrow money for free.
This is a slightly indirect way of pumping money into the economy. Allowing borrowers (big banks, in this case) to borrow money on the cheap is an attempt to loosen things up a bit in the financial markets, and hopefully stimulate new projects, new industries, and new jobs.
But it just hasn't been enough. And here's the point of this post: the Fed is considering new ways of pumping more money into the economy. They've got their hammer, and they're lookin' for nails.
What has been the result of the absurdly low interest rate over the past 20 months?
Let me underscore that "buying back their own stock" point: there has been $258 billion dollars in stock buyback this year, compared to $52 billion at this time last year. And they're getting the money to do it from Uncle Sam.
Imagine the corporate boardroom discussions, happening all around the US:
Chief Financial Officer: "Hey, we can get a loan from XYZ financial institution for $2 billion at 0.1% interest per year. That's the lowest cost of money, ever."
Chief Executive Officer: "Sounds like a good deal. I want each of my division leaders to examine what they could do with an extra $500 million this year."
Chief Financial Officer: "Boss, all of the divisions say they can start some projects, but can only estimate a return of 3-4% in the next year on our investment."
Chief Executive Officer: "What??!? 3-4% return on investment? That's a miserable deal for our stockholders! I expect our stock price alone will go up 10% this year! Why would I invest in R&D at a 3-4% return when I can invest it in myself and make at least 10%? The stockholders will be happier, too."
Hopefully I've made the point pretty clear by now. The Fed has a hammer: the interest rate it sets when loaning Fed money to banks. It's a really big hammer. It can be very effective when the economy is chugging along. But when it's sputtering, it's not a very effective hammer.
The road to recovery is not paved by giving money to corporations so they can buy their own stocks back. That doesn't create new jobs, and it really only helps those people who already own vast amounts of stock. It doesn't put bread on anyone's table that isn't already covered in filet mignon. Instead, I think the Fed needs to find new ways to *directly* create new jobs, or provide better incentives that will push industry to create new jobs. If the Fed can't do it, then stand back and let another government organization stimulate the economy. This kind of "new thinking" isn't the message we've been getting from the Fed.
I'm worried about the "quantitative easing" measures that are bandied about now -- another fancy way of pumping money into the system. They don't address the problem at hand, and they have a cost that we'll have to pay off (specifically, my generation) in the future. And it didn't really work for Japan when they tried it before, but they're trying it again anyhow.
A hammer is a very poor choice of tool for a screw. And the economy looks screwy to me.
The above quote is attributed to Abraham Maslow, and it rings true time and time again. In this particular case, I think it applies to The Federal Reserve.
News flash for those who have been living under a rock: housing prices have NOT been rising indefinitely (as many investment products were designed to take advantage of), and when this pyramid scheme began to unravel (I love mixed metaphors), a ton of things happened very rapidly. Credit markets dried up; countless business plans that were based on aggressive growth failed; countless more projects dried up or did not get funded in the first place, and unemployment shot up above 10%. The Fed pulled the biggest lever it could, and dropped its lending interest rates like a rock:
Source: http://www.tradingeconomics.com/Economics/Interest-Rate.aspx?Symbol=USD
Look again. The interest rate has been almost ZERO since January 2009. Twenty months and counting. Historically, it's usually around 5%, but was as high as 20% in March 1980. Banks and other major financial institutions can borrow money for free.
This is a slightly indirect way of pumping money into the economy. Allowing borrowers (big banks, in this case) to borrow money on the cheap is an attempt to loosen things up a bit in the financial markets, and hopefully stimulate new projects, new industries, and new jobs.
But it just hasn't been enough. And here's the point of this post: the Fed is considering new ways of pumping more money into the economy. They've got their hammer, and they're lookin' for nails.
What has been the result of the absurdly low interest rate over the past 20 months?
- It has probably stemmed the loss of jobs in this country. Sorry, I don't have a definitely source to cite for that; it's just my opinion.
- It has not turned the economy around. (See current unemployment rate.)
- Large companies, given the opportunity to borrow large amounts of money basically for free, have been investing in themselves and buying back their own stock.
Let me underscore that "buying back their own stock" point: there has been $258 billion dollars in stock buyback this year, compared to $52 billion at this time last year. And they're getting the money to do it from Uncle Sam.
Imagine the corporate boardroom discussions, happening all around the US:
Chief Financial Officer: "Hey, we can get a loan from XYZ financial institution for $2 billion at 0.1% interest per year. That's the lowest cost of money, ever."
Chief Executive Officer: "Sounds like a good deal. I want each of my division leaders to examine what they could do with an extra $500 million this year."
---THE NEXT WEEK---
Chief Executive Officer: "What??!? 3-4% return on investment? That's a miserable deal for our stockholders! I expect our stock price alone will go up 10% this year! Why would I invest in R&D at a 3-4% return when I can invest it in myself and make at least 10%? The stockholders will be happier, too."
Hopefully I've made the point pretty clear by now. The Fed has a hammer: the interest rate it sets when loaning Fed money to banks. It's a really big hammer. It can be very effective when the economy is chugging along. But when it's sputtering, it's not a very effective hammer.
The road to recovery is not paved by giving money to corporations so they can buy their own stocks back. That doesn't create new jobs, and it really only helps those people who already own vast amounts of stock. It doesn't put bread on anyone's table that isn't already covered in filet mignon. Instead, I think the Fed needs to find new ways to *directly* create new jobs, or provide better incentives that will push industry to create new jobs. If the Fed can't do it, then stand back and let another government organization stimulate the economy. This kind of "new thinking" isn't the message we've been getting from the Fed.
I'm worried about the "quantitative easing" measures that are bandied about now -- another fancy way of pumping money into the system. They don't address the problem at hand, and they have a cost that we'll have to pay off (specifically, my generation) in the future. And it didn't really work for Japan when they tried it before, but they're trying it again anyhow.
A hammer is a very poor choice of tool for a screw. And the economy looks screwy to me.
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