Stealth Laws and Subsidy Bubbles

HR 2454, The American Clean Energy and Security Act of 2009 passed the House on Friday. It is a 1,090 page document with a 300 page amendment document that apparently was never reconciled before the vote. This led to an interesting question from Texas Republican Rep. Joe Barton:

"If a bill for which there is no copy were to actually pass this body," Barton asked, "could the bill without a copy be sent to the Senate for its consideration?"

Answer: Not unless Pelosi and Reid have telepathic powers of which we are unaware. Should a bill ever materialize in the physical realm, it's likely most senators won't read it either. Which raises another question; Can anybody still call this "representative government" with a straight face? I suppose that the act of voting either up or down would represent someone. But who?

From what I gather from people who have some semblance of an idea what's in the bill, it contains taxpayer funded subsidies for renewable energy projects. Unlike the "hard news watchdogs" who are busy barking at Michael Jackson's multiple autopsies, George Will has some actual information about it in his latest opinion piece. He includes a link to a study done by economics professor Gabriel Calzada at the Universidad Rey Juan Carlos. Spain is a world leader in renewable energy production. Not coincidentally, Spain also has an official 18% unemployment rate. Some excerpts from the reports summary:

Spain’s experience cited by President Obama as a model reveals with high confidence, by two different methods, that the U.S. should expect a loss of at least 2.2 jobs on average, or about 9 jobs lost for every 4 created, to which we have to add those jobs that non-subsidized investments with the same resources would have created.

...it is not possible to directly translate Spain’s experience with exactitude to claim that the U.S. would lose at least 6.6 million to 11 million jobs, as a direct consequence were it to actually create 3 to 5 million “green jobs”... the study clearly reveals the tendency that the U.S. should expect such an outcome.

Each “green” megawatt installed destroys 5.28 jobs on average elsewhere in the economy: 8.99 by photovoltaics, 4.27 by wind energy, 5.05 by mini-hydro. These costs do not appear to be unique to Spain’s approach but instead are largely inherent in schemes to promote renewable energy sources.

Professor Calzada's study goes on to discuss the dangers of "countercyclical" situations. The countercyclical is a fairly simple, mainstream idea familiar to any economist, and goes like this:

1) The government wishes to fill a perceived need and calls for incentives (taxpayer subsidies) to be provided to private industry.
2)The taxpayer funds are used as a selling point to attract private investors.
3)Investors, seeing a potential for short term growth, add their money to the pool (artificial demand and misallocation of resources).
4)Unpredictable and uncontrollable market forces (hurricanes, civil unrest, etc.) cause growth to slow, stop, or recede.
5)Private investors, seeing their returns drying up, pull their money out, causing the government to call for further and larger subsidies, which creates the countercyclical.
6)Seeing a possible recovery, private investment returns.
7) The cycle repeats with ever higher peaks and ever deeper troughs (Elliot waves).
8)The end is reached when government is either unable or unwilling to sustain ever larger subsidies to a now massive industry. Private investors, sensing that the end is near, begin selling in panic and the largest downturn of them all ensues.

We have seen two of these countercyclical patterns in the last twenty years. The technology bubble of the 1990's was allowed to crash. We are currently in a countercyclical period with the financial industry. It may or may not be the last; time will tell. Might we avoid all this and allow people to invest in value rather than artificial demand? Have our representatives learned nothing in the last twenty years? I wish I could be optimistic, but I see interesting times ahead.

Vote For Me, I Only Take My Pants Off At Home

As a general rule, I don't comment much on social issues. It's not that I don't care about them, but I'm hardly a poster boy for the family values set. I make no claims to marriage counseling skills, relationship building formulas, or advice for the lonely at heart. However, given the twin SNAFU's in the Republican ranks of late, I think remaining silent would be a mistake.

I think we can all agree that fidelity is a good thing and infidelity isn't. And, it's not just for married people either. Fidelity to ones country, ones family, ones cause, ones friends, and so on, is a good thing. Go down the list and fidelity is always better than infidelity. The point overlooked here is that even by bachelor standards, (yes, there is such a thing) both of these guys are seriously unhinged. Let's start with Governor Sanford.

Argentina? The guy went all the way to Argentina just to get a little sugar in his coffee. Had he gone to the Adirondacks, like his staff said, and picked up the first cutie impressed with his clean fingernails, I could skip this post. I mean, I might drive to Dayton for it, maybe as far as Fallon even, but Argentina? For God's sake man, get a grip. The rule here is that anytime you have to board an airplane to chase a skirt, you've probably lost all sense of perspective.

And then there's our own Senator Candypants: Cheated on the wife, strike one; she was married, strike two; and here's the kicker. Never, ever, ever, never, ever fish off the company pier. Never. Ever. Or, as an old friend once explained it, 'A dog don't eat where it shits. It's just common sense'. If your amount of common sense is something less than the average canine, you have no business being in the front yard.

Now then, since we Republicans are in a back-to-basics mentality, lets revue; near = good, far = bad; single = good, married = bad; friend = possibly good, co-worker = bad. It's not that difficult. If you're having problems, perhaps you could make some flash cards. I'll bet the wife might even be willing to help.

I'm glad we had this little talk.

Keeping Up With The North Koreans

I don't remember hearing about this when it happened, or maybe it was one of those news items that went in one ear and out the other. The article describes a gunfight on Dec. 22, 2001 between the Japanese Coast Guard and a suspected North Korean "spy ship". It makes for some pretty sobering reading in light of the UN Mandate regarding vessels suspected of carrying nuclear contraband.

There is also some naval maneuvers described here regarding the North Korean threat to launch a "test" missile towards Hawaii.

With all the attention on the Iranian's fight over who will represent the Mullahs, it seems to me this is the more important story. The attention on Iran could be short-lived. Happy Father's Day from the Axis of Evil.

Fed Transparency

Texas Congressman Ron Paul's Federal Reserve Transparency Act (HR 1207) now has 234 cosponsors including Dean Heller (of course), and Shelley Berkley, along with 64 other House Democrats. From the summary:

Directs the Comptroller General to complete, before the end of 2010, an audit of the Board of Governors of the Federal Reserve System and of the federal reserve banks, followed by a detailed report to Congress.

The cozy relationship and cronyism between Wall St. and Washington would surly make for some interesting headlines in the future.

Meanwhile, over in the Senate, the companion bill, S.604 has only 2 cosponsors and is currently in the Committee on Banking, Housing, and Urban Affairs. Neither Nevada Senator has spoken about it. Senator Ensign has been a little preoccupied with a zipper malfunction lately, and Senator Reid presumably wants no part of it; the Senate Bill I mean.

Progressive Roots and Silent Tigers

When I was little I would sometimes ask my Grandma to tell me a story about "the olden days". She was born in 1892 and she was a Grandma straight out of central casting; short, plump, with wavy gray hair and enough wrinkles to make a prune jealous. She would always start with "Things were very different when I was a little girl". She'd then go on to tell me about Christmas Day supper - no presents, block ice delivered by horse drawn wagons, and all the things one could buy with 2 cents. She had seen many wondrous inventions like airplanes, washing machines and deodorant for men, but she never said a word about politics. That, apparently, was Grandpa's realm.

He had grown up in the mines, and was a solid pro-union Democrat all his life. I learned later, much later, that he had also been a bit of a drinker and a "brawler" before Grandma made a church-goin' family man out of him. That would explain why Grandpa didn't like to tell stories to little boys about "the olden days". Too bad. I'm sure he must have had some classics.

So now I'm reading Jonah Goldberg's Liberal Fascism as part of the Voxiversity group. For the record, I went 9-1 on the first quiz. Vox seems to be taking his time with this one, so I've been able to read ahead. The first 3 chapters cover the early years of Mussolini and Hitler, and a thumbnail sketch of the life and times of Woodrow Wilson. What is most striking about this time in our history is the popularity of fascist/socialist ideals.

Democratic Capitalism was seen as having run its course. It was too messy, too chaotic, with too much wealth and power concentrated in too few hands. Liberty and individualism would need to be replaced. It would be easy to demonize the early fascists/socialists, call them misguided, put them in a nice, neat little box and label them as damaged goods. Easy, except for the fact that they had no foreknowledge of what would transpire in the coming decades, and for me personally, the case of Grandpa's tigers.

In my mother's house are two pictures of tigers. They are finely woven with silk thread in the oriental style. Grandpa received them as a gift from a group of Japanese miners for his efforts in improving their working conditions. The exact details of what he did are unknown. Did he risk his next promotion? Did he risk his job; his life? Did he get what he wanted, or settle for what he could get? Nobody knows. Grandma did most of the talking. We only know that he helped them somehow, and they were grateful. Which brings us back to the importance of individual liberty.

No matter the system, it is the individual that senses injustice, judges right from wrong, decides on action or non-action, and ultimately learns to live with his own conscience. When the meetings are over, the arguments made, the deals cut, the doors close and we have only ourselves to combat. Collectivism can do none of these things without appealing to and convincing the individual. The lone conscience, searching itself, will always have the final word.

Palin Hits Back

As if winning the election wasn't enough, the left continues their attacks on Sarah Palin. What are they afraid of?

Visit msnbc.com for Breaking News, World News, and News about the Economy

I have to love the "so-called comedian" bit. Nice shot.

Fascism 101

Voxiversity 3 is starting this week with Jonah Goldberg's "Liberal Fascism". Before any of my lefty friends out there roll their eyes, Vox says there's plenty in there about Republicans too. Just having read the introduction (the first assignment) Goldberg has already identified Compassionate Conservatism as fascist and says that No Child Left Behind would have been a good fit with Mussolini's school reform policies.

But, this will mostly be about the roots of the American Left. Up until World War 2 fascism was pretty popular in the U.S., and many of it's ideas are still with us. The turn of the 20th Century ushered in many changes in the relationships between government, business and the military in our country. It's an important time to study.

There are 2 big problems with the study of fascism. 1) There is no consensus as to what fascism is. A lot depends on the culture it arises in and the personality of the leader. It is not necessarily racist. 2) The Holocaust tends to overshadow any debates on the subject. The anti-semitism in Germany was not matched by the Italians. Two surprising facts are that there were several Jewish fascists serving in Mussolini's government up until the Nazi invasion in 1943. Fewer Italian Jews died in WW2 than in any other European country except Denmark. Not all fascists were/are Nazi's.

If anyone is interested, you don't have to sign up for anything; just get the book (available in paperback) and be ready for the first quiz on Saturday. Having watched the first 2 voxiversities go by, I'll warn you; Vox keeps a pretty brisk pace, so it will take a serious effort to keep up. Assuming I'm not culled from the herd, I'll be posting some updates as I go along. It should be fun and enlightening.

Remember

The Negative Interest Rate Explained

There have been several articles written over the last moth or so about the possibility of negative interest rates. Conventional wisdom holds that interest rates can not go below zero. With the Fed Funds Rate currently at 1/4%, any further action by the Federal Reserve would have to be negative. Raising interest rates would be the smart thing to do, but is politically unacceptable. So, are negative interest rates possible?

The easiest way to understand the idea is explained by Alex J. Pollock writing in American.com:

Would anybody rationally pay $1.02 for $1.00 in cash? They do today, if they take cash as a non-customer from an ATM. The average ATM surcharge fee is about $2. For a $100 withdrawal, that is equivalent to a price of $1.02. Alternately thought of, if a $200 withdrawal were cash for one month, the average fee would be equivalent to a negative 12% interest rate.

Currently, the banks are using the bailout money to increase their deposits with the Fed in an effort to cover all their bad loans and toxic assetts. One way to get the banks to release the money would be for the Fed to "go negative", giving the banks an incentive to put their newfound wealth somewhere else.

The problem for the Fed right now is that all other interest rates, including passbook savings accounts, ultimately take their cue from the Fed Funds Rate. Imagine the political fallout when us commoners are not only paying to bailout the banks with our tax dollars, but seeing our savings drained by those very same banks. The resulting bank run would not only bring on the collapse of the Federal Reserve System, but would surely spell the end of several political careers.

It's the proverbial rock and a hard place and a good reason why I believe the Federal Reserve System is about to be replaced, either by choice or by default.

Correction(s)

In case anyone missed it, Jillian's Dad left a comment that reads in part:

They (the Mitty Monarchs) were playing for the Division II California Central Coast Section Championship and with the win they remained ranked #1 in the country on both the ESPN and USA Today high school softball polls.

Apparently this citizen journalist needs to invest in a 99 cent notebook along with his fancy-shmancy camera. Management regrets the error.

Bernanke Loses Grip On Reality

Federal Reserve Chairman Ben Bernanke made some unbelievably stupid statements before a House panel yesterday.

“Maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance.”

Let's take a look at the "confidence of the financial markets" that Mr. Bernanke seeks to maintain. Here's what the confidence in Citigroup looks like:



Here's the confidence in Bank of America:



But wait, somebody's confident in Goldman Sachs:



The company with the inside line to the Treasury Dept. looks to be coming along just fine. I'm becoming increasingly confident that the game is rigged. Here's another pearl of wisdom from the chief:

“Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth,”

After 2 quarters of -6% GDP, and trillions of dollars poured down the toilet that is the financial market, this amounts to a deathbed conversion. Anything short of disassembling the Federal Reserve System, and throwing the bankers into debtor's prison, won't restore financial stability. Unfortunately, few of our leaders are set to "begin planning" for that.

Charts courtesy of bigcharts.com

Notes on a Spring Break

For part of my vacation, I went to visit my Dad in Las Vegas. In between a busy schedule of eating, drinking, and laying about, we managed to visit a few petroglyph sites in the area. Grapevine Canyon is about 50 miles south of Las Vegas and well worth the trip.



Unlike northern Nevada petroglyphs, which are carved into basalt and last for thousands of years, petroglyphs in the south are carved into oxidized granite. As the oxidation weathers away, the petroglyphs fade out. These are probably 2-3 hundred years old. Just judging from some of the designs, they're of a much more recent vintage.



We visited a few other petroglyph sites that weren't nearly as impressive as Grapevine Canyon, but in a meadow in Red Rock Canyon I spotted what I think is a wild Desert Orchid in late bloom. It's a rare sight, if that's what it is.



Speaking of wild desert flowers, I also met-up with E!!-lizabeth.



Yep, there I was, in a darkly lit uptown cantina, a rum and coke in one hand and a steak sandwich in the other, plotting revolution with a classy dame. Man, I love blogging.

Then, it was back to San Jose to watch my niece, Jillian, play for the Central Coast Catholic League Championship. With 2 outs and a runner on 3rd, she stepped up to the plate...



They went on to win 3-0, finishing the season 32-0 and ranked 1st in the state. Some will say this is the result of good parenting skills. True enough. However, the effects of good uncling can not be overstated. It is the drinking of half of the dad's beer that allows good parenting to take place. It takes a village, don't-cha know.

Experts Grasping At Straws

I'm sure I'm not the only one to notice this, but the blame game over the economic situation seems to have entered full tilt boogie mode. First, it was all Phil Gramm's fault, no wait, it was Bill Clinton. Hang on a minute, it was Jimmy Carter's fault, no wait, it was Allen Greenspan that caused it all. Just a second here, what about Barney Frank? Now, here comes Paul Krugman blaming Ronald Reagan. It's awfully nice of Paul not to leave out the 'ol Gipper. Blaming the only dead guy in the group will surely end the argument.

Meanwhile. Vox Day continues painting the big picture uninterrupted:

...I doubt that it is necessary to do much more than wait for events to take their course. Pyramid schemes always fail in the end, and there are an increasing number of signs indicating that the post-Bretton Woods reserve currency system is rapidly approaching terminal status.

So bring it on boys, those of us at the bottom of the pyramid are as ready as we'll ever be. Solve the debt problem by creating more debt. Solve the over spending by spending even more. The sooner the collapse comes, the sooner the madness will stop. Maybe then someone in the expert class will ask the right question; Who was doing something right when things were going well?